I highly recommend that you do not sell them!! You can definitely make them into a t-shirt type quilt. Your squares will be alot smaller and you will definitely need to use a stabilizer but I made a quilt using 40 different pieces of baby and toddler clothes from my 2 boys. I even included a few that had tiny pockets in them. I am starting a second one with slightly older clothes that I am collecting. Some of their bibs had cute embroidery on it and I thought about cutting it out and adding it to the second quilt. You can make it into a wall hanging or lap quilt or even bigger. You don't have to make it immediately either. Alot of people make them for the kids when they graduate highschool.
Search "t-shirt quilts" for more ideas