You can get 100% cotton shirts at Goodwill or the Salvation Army stores and cut them up into blocks or strips. Some of these stores also sell fabric, sometimes people donate it. Connecting Threads, Thousands of Bolts, and Marshall's Dry Goods are good places to start online for good prices on Fabric. Maybe check out your local Wal-Mart? Some of the ones around here have started carrying fabrics again. Just be sure to check them to make sure they are not flimsy. Sometimes people sell fabric here on the board, that's worth checking out! Good luck fabric hunting and have fun!
Oh, and for all you wool lovers out there, my cousin buys wool coats from Goodwill and the Salvation Army stores, cuts them up and uses the wool for crafts and dolls. She says it's cheaper than buying wool.