I use either 80/20 or washable wool--have used a poly on one for a little girl that needed something she could drag to daily therapy sessions (developmentally delayed)and would never "wash out", but don't like the poly cause it's more flammable.
On thread I usually use either SoFine or a cotton. Think your quilting 3-4"apart will work fine. My kids (30's)have some crib quilts that were quilted much further apart than that and they survived! Part about thread getting tangled on baby fingers/toes was just be sure to get any thread ends clipped.