Me, too. I use sheets with a maximum thread count of 200, and have used poly/cotton when the cotton is 60 % and poly is 40 %. I also use flannel sheets as backing. I buy them on sale after the hoiidays - there's a lot of fabric and a "free" matching pillow case!
I think that the prohibition on using sheets came from the fact that sheets are harder to hand quilt, but I'm no expert on the subject. My advice? Test with the sheet.
The thread I use is the polyester thread from Connecting Threads. It seems to work well whether I'm quilting with a sheet or cotton fabric. Good luck!