I always use cotton. It breathes and few babies have allergies to cotton. I also wash the gowns in Dreft and rinse a couple of times before donating them. Oh, I also place them in zipper-top bags, so they don't have to worry about any allergens. The nurses are always so happy when I deliver a few.
Our dil is due to have another in a couple of weeks. Over the weekend she told me we're past the preemie stage. That's what got me thinking of these, so I had to make a few. I figure I'll deliver them when we go for a visit.