I've used printer paper, the paper for paper piecing, marking pens and newsprint. I prefer the newsprint. I can get a roll from the local newspaper for about $4 and it lasts a long time. I have to cut it to fit in my printer for printing paper piecing patterns. It's a lot cheaper to do some of the work myself.
I find the smaller stitches work better, no matter what paper I use. I use temporary spray glue to put it on the quilt and I do small sections at a time. If there are lots of turns in the design or lots of crossing of previous lines I pin as well.