I used one of the foam covered insulation boards from Home Depot. I was advised to use the one with the silver coating on the outside (I think it says R12 on it - about $12), as it held up the best and was easiest to pin to. Also, I covered it with high-quality flannel (printed with 2" squares) which was so much better than the cheaper flannel or the flannel backed table clothes that I had tried in the past. If you make the flannel like a pillowcase, and just lean the board against the wall, you can turn it around and switch sides - you'll have 2 for the price of 1! Mine has been leaning against the wall for about 2 1/2 yrs now.
I had a problem, in that in TX it gets very hot. We run ceiling fans all the time, and no matter how wonderful the flannel or felt was, the blocks would eventually peel off from the wind of the fan. So, having something to pin into was a great help - and it pinned so easily that I LOVE it now as both a design wall, and a piece of it is also my 'idea' or 'inspiration' area.
I hope this helps. You'll LOVE having one, no matter what you decide on! Currently, I'm trying to figure out if I can have a 2nd one...I do love my design wall! I wish I had one whole wall as one :) They're just so handy!
Debbie in Austin