Personally, I would start with 9" blocks. I would definately wash the fabric before cutting into blocks because of shinkage possibilities....Be sure you use plenty of stabilizer under your blocks to minimize any drawing up and "ruffling" when you do your embroidery work. When you have the blocks completed, then you can cut them down to the size you need for your quilt. Better safe than sorry! This may be an overkill with the size, but you never know!
Good Luck!