I've made quit a few. I've used Pellon 906, Pellon 911ff (like it better than 906); Flex-fuse (a knit that does have stretch one way) and Shape-fuse. I prefer Shape-fuse, which is used in men's suits and sometimes you can find it at 56" widths which makes it much cheaper to use than the others which come in 20" widths. There's also less bulk than the Pellon and no stretch like the Flex-fuse. All are about the same price if 20" widths (the Shape-fuse comes in 20" and 56" and the 56" is just cheaper because it covers the whole t-shirt back without using several small pieces, etc).
Yes--you can use the knit jerseys--I've used football, basketball and hockey jerserys. The issue with them is not so much the knit, but they usually either have a heavy-duty emblem on them or are printed with pure plastic--neither plays well with quilting! One word of caution--be sure to read the directions on the stabilizers as you will want to use a lower heat on your iron with the poly jerseys AND also with any t-shirts that are a cotton/poly blend--some fusibles don't work as well at the lower heat.