I've done quite a bit of discharge dyeing and love it. The results, however, are unpredictable. It depends on the dye that was used for the original color. Not the color of the dye, but the chemical base of the dye. It generally does not simply lighten the shade of the fabric.
Yes, you have to stop the bleach with either anti-chlor or hydrogen peroxide and water (a 1:8 ratio is good). The usual sequence is bleach, clear water bath to rinse out bulk of the bleach, stop bath (5 min or so), and then launder with a mild detergent. Water alone will not stop it. If you don't use a stop bath, the bleach will rot the fabric. Letting it dry on the line would be a mistake. Bleach works very quickly when you use it for discharging fabrics.
There is a ton of information available online. Look for 'discharge dyeing'. And remember, bleach can be dangerous to skin, eyes, lungs, clothes, etc so act accordingly.
Some good sites to start you off:
http://www.threadsmagazine.com/item/...leach/page/all
http://www.pburch.net/dyeing/FAQ/dis...hemicals.shtml
http://www.dharmatrading.com/techniq...scharging.html