I did not prewash my flannel and had no problems, but I would say that you should use comparable quality flannel throughout the project so that when you do wash, some blocks don't shrink more than others.

I would wash before cutting. I have learned that fabrics do not shrink evenly - and I dislike the puckered look.

I always pre wash flannel, no matter what I make. I know it'll still fray when making the raq quilt but I want the shrinkage to be minimized before I cut out each block.

I've made about 8 rag quilts and never washed any flannel first and have loved each one. Rag quilts are just fun to make because you don't have to be exact. By not washing the fabric, it makes it even more fun. It's such a hassle to iron the fabric afterwards. I actually do not prewash any of my fabrics anymore and don't find any issues. I believe fabric does not shrink as much as it used to. If you buy quality fabric, it should not shrink that much! I have always sewed the X in the center of each square. You end up washing it several times to get it to fray and with sewing the X and not making the squares so big, don't worry about it. I really like the crinkled look of washed quilts.