I make a lot of hanging dishtowels. I like the terry cloth towels which are big enough to cut in half and get two hanging dishtowels. You can find Better Homes and Garden brand at Walmart and they are every economical. I have also used the cotton feed sack towels when I do machine embroidery on the towel.
For my topper I use the shape of my iron with a few inches added to each side. I found that idea on a website that is no longer available. It's the perfect shape. Sew the two pieces of the top together leaving the straight edge bottom open, fold up the open bottom, put a piece of stabilizer in the tip for the buttonhole, gather your towel and place it in the open bottom, sew the towel in place, make your buttonhole on the pointy end, add your button and it's done. Fun and easy to make.