regarding when to start - if you have a way of hanging the top as it goes along, it might be of interest to attendees, and spur participation, if you could hang it as blocks are done... in this case, it might be best on the side of the stage, and not directly behind the players. sounds like you're putting messages on the blocks, so hanging it in this way(too far for people to read messages but close enough to see blocks) saves the messages from view until the end while keeping the concept alive and generating interest.
As far as size - it depends on how you intend it to be used in the future - if you intend to keep it for use in the theatre, then find a spot to hang it and make it specifically for that spot.
not sure how much money you need to raise, but our group raises money each year for a scholarship fund from a "community quilt" -folks purchase a block, or pay a little less and make a block according to specifications we provide, then it's raffled off annually. Each year the quilt is different, so we get different amounts, but the least we have raised is about $800 and the most about $1600 in one year. Folks now look forward to seeing what the quilt is and love buying the chances to win it.