I would wait until the quilt top is completed, sandwich made, quilt quilted and trimmed before cutting the binding. but the 2 1/2" is the width to cut the binding- and for all of your blocks the seam allowance was probably already included- you should cut everything to the size the cutting chart says to cut. I never cut out a whole quilt at once- but that's just me- but borders, backing and binding are definitely left until needed- your top may not be the same size as the one in the pattern & if your borders are already cut to size they may not fit- best to adjust and cut as you need them.