I think how much the fabric unravels depends a lot on the washing machine. I used to have a traditional top-loader with agitator, and I didn't prewash because it destroyed too much of the fabric. My current machine is a front-loader and most fabric only frays a tiny bit. Not sure how well it would do with pre-cuts as I don't buy those. My minimum size is generally a yard.
I only have experience with the two washing machines, and I don't know if that's generally true or if that's just the way my particular machines were. That's something I would like to know since it would be a factor in my next purchase. Hmm, maybe I should start a thread on this.