I was intrigued and read your instructions, as I have also made my own quilt labels...I haven't used this method, so found it interesting! Thanks!
You can also pretreat your fabrics with chemicals designed to make the inks adhere to your cotton fabrics, and is cheaper than buying fabric sheets in the quilt stores. The company that I buy from is listed below.
http://www.cjenkinscompany.com/
I like to scan a block from my quilt into my computer. I then can print it out in color on my pretreated label (fabric ironed to freezer paper, trimmed to size) and walla! I have a beautiful color block label.