When I use flannel, I wash it and dry it twice to mak sure it has really shrunk as much as it is going to. I think it makes the fabric stronger too, because the threads are closer together.
I like to heavily starch flannel before cutting to eliminate stretch when sewing. You can probably find my method by doing a search on starch; if not, I can repost. For me, at least, it's much easier than trying to use spray starch.
It is usually recommended to sew flannel quilts with 1/2-inch seams rather than 1/4-inch seams because flannel has such a tendency to ravel.
I think you could make the binding out of flannel as long as you use a double-fold application (single would be too flimsy).