You are definitely in my prayers. I'm sorry about your mom and dad. This will be a bittersweet holiday for you. I lost my mom right before Christmas, and I always have lots of different emotions at the holiday. I love Christmas music, but it always makes me cry.
As for your questions, just do what helps you get done and get by. Here's my opinion, for all it's worth (not much at last accounting (O: !
1. I don't see why not. They're both cotton, as long as they've been prewashed and preshrunk. But even that may not be a critical issue when time is paramount.
2. If I want my block to be 8", I cut them 10". Then sew a 1" seam on all sides, clip to pretty close to the stitch line.
3. I don't know which batting allows the most spacing, but about the buttons, just make sure they aren't for little guys. They might be a choking hazard. Other than that, cute idea!
4. I just did one that way. I folded the back to the front, and used a decorative stitch to stitch it down. Turned out really cute!
Good luck and take care of yourself.