Ok I just did a quilt like this for a friend and I got the fabric sheets from this company
http://www.cjenkinscompany.com/
on line. You can get all differant types of materal pre finished to print on that you just run through your printer, but the cheapest is the broad cloth which runs about $14 per 10 sheets ( I just looked and they have a sale going so it's only $9 per 10 sheets)
Anyway, you print the photos, heat set the ink, rinse them in a mild soapy water, let them dry a bit then iron them flat and then cut & sew them into your quilt anyway you like. It sounds like a lot but it's really simple to do.