Like Nora said there have been several topics on here about how to make a rag quilt. I just finished three of them and have started a fourth. I use 7 in squares and 1/2 in seam. You can use as many colors as you like. I used two in my first one. The second one has 3 and the third one has lots of different fat quarters. They go together really fast. The hardest part about making a rag quilt is snipping all of the seam after it is sewn together. I suggest that you purchase a pair of Fiskards spring action rag snips. It will really save on your hands. If you run into any problems just pm me and I'll be glad to help.
Barb