Hello Care Bear, I just moved to Peoria, Illinois this past summer.
Those darn seam allowances and finished versus cut sizes!. You can use the "standard" 1/4" quilting seam allowance or there is nothing wrong using a 1/2" -- just be consistent. There are various ways to use the different sized blocks, from trimming them all down to 7.25 or by framing them with woven (standard quilting fabrics) to make them a larger consistent size.
We have another brand new member also making a t-shirt quilt for a daughter -- her thread is here, you might find some helpful hints.
help! I"m new to quilting...