I think the pricing of these types of items depends *greatly* on how cute/unusual they are. I have been at craft shows where these kinds of things did not sell at all, I think largely because they just weren't sufficiently outstanding. People have to have a reason to buy your burp cloths instead of a package of them at Target, for example, especially if yours cost more. It helps to have some clever feature associated with the item, and especially that the item look especially colorful or pretty or just plain eye-catching.
How would you market these items? Who would be your target customers?
I myself would probably never pay for a fleece tied blanket. I know that people buy kits from JoAnn's to do this, but not sure anyone buys the finished product? It might actually be easier to sell these as kits; however, then you have the problem of paying more for the kit fabrics than a place like JoAnn's pays (because they can buy wholesale).
Are you planning to create a real business, applying for a wholesale license (so you can buy materials at wholesale prices) and charging sales tax (and filing sales taxes)? Or are you thinking more in terms of just a home hobby type of thing? I think it's hard to make money doing this either way, but probably harder if you are doing it without being able to buy wholesale.