I generally add the side borders, then the top/bottom. If you do it this way, you may be able to get away with less fabric (assuming you would cut them in one long piece). There are some great border hints on Quiltville
http://quiltville.blogspot.com/2005/...der-hints.html
Flannel can be very nice for backing. It may end up pretty warm if you also have batting in it. The climate where it would be used may be a consideration on that.
I'd ask the long arm quilter her opinion on the quilting. I would be more inclined to go with a lighter neutral thread color when you have multi colors in the blocks myself. I think a dark thread on the light blocks would distract from the t-shirt designs.