I would definitely prewash and dry (maybe twice) before making baby blankets. Some flannels don't shrink at all, but most shrink a *lot* -- and in unpredictable ways. If you use one of those flannels and don't prewash, the first time the nice baby blanket is washed it is likely to distort and not lay flat anymore.
Degree of shrinkage in a flannel can vary with the grain, so you can get 10% shrinkage in one direction and 15% in another. This is not a problem with yardage, as you can iron flat and are good to go, but it can be a big problem in a bound blanket (even self-bound).