I cut off the sleeves/back (leaving as much of the front as possible). Then I iron on a light weight stabilizer that is much bigger than the block I want. Then I cut the block out the size I want. Be very careful about pressing/ironing the front of the t-shirt as some of the shirts have stuff (for lack of a better word) that melts. Iron from the back.
As far as choosing a block size, the options are endless. You could make them all one size or you could make them all a finished size that is a multiple of 3 (like cutting out 3 1/2 squares, 6 1/2 squares, 9 1/2 squares, 6 1/2 x 9 1/2 rectangles) etc and fit them together like a puzzle.
I cut my boys' shirts to 9 1/2 blocks and plan to use them as the center in each block i make. I have 50 shirts for each boy's quilt. I also already made a quilt for my older son using his sports jerseys and made those blocks 12 1/2 inch squares. I hope this helps.
Use the search portion of this board to find pictures of completed t-shirt quilts. You will see so many variations and one should inspire you. Don't forget to post pix when you are done so we call all see.