Of course the use of the embroidered blocks would dictate what would be the best fabric to use. I think a moda solid would be nice to use if they are for a quilt top, wallhanging or pillows. But, if they are for say a curtain or garment, I would think a washable blend that didn't wrinkle would be better.
I think a quick wash would be good to shrink the fabric and a pressing would be where to start with the muslin. In my experience, muslin can shrink quite a bit.
As far as the needle goes, use an embroidery needle. It has a larger eye for threading and is slim to go through the fabric nicely.