Hi Denise,
No, I haven't washed the muslin. I usually don't pre-wash my fabrics because I love that wrinkled look. I did however, cut the block a 1/2 inch larger than required to allow for that when cutting the blocks to size.
I'm kind of new to applique, and have seen that many quilters wash their blocks after completing them and then put them together in the block, so I may do that too...?