Sizes? 3-5 inches seem to be the best. 6 inches was fine, but a tad larger than it needed to be.
I would say between 2 and 4. My cousin's daughter still loves her eye spy quilt and she's now 6.
Don't make it complicated, but do include as many things as you can. I did a reversible quilt featuring Mickey Mouse on the other side because I wanted to practice the reversible technique before doing a larger quilt. You might consider having something for an older child on the flip side just so that they use the quilt longer. :)
http://pic20.picturetrail.com/VOL252.../171370384.jpg
http://pic20.picturetrail.com/VOL252.../171370381.jpg