I have made several photo quilts and have always used Printed Treasures. They are expensive but you can get quite a few photos per sheet if they are not too big. I also use my Joanns coupons for the sheets. Search on this site for other options. Several people have talked about ironing freezer paper on high thread count fabric and using that to print on. There is also something called Bubble Jet that is a liquid you can soak the fabric in for printing.
Good Luck....