Oh what an exciting project to do for your GD. I'm thinking a crazy quilt type block might be fun for this. You could crazy quilt different blue fabrics with yellow stripe diagonally through the middle. Then, use the yellow for sashing and blue for cornerstones. People could sign the stripe or the sashing. And, I use pigma pens for writing on fabric. I make my labels that way. I have seen signature quilts where someone had embroidered over the signatures. They would be legible forever that way.
I did help a cousin make a signature quilt for her GS one time. She had squares of fabric at the baby shower that she gave to each guest. Everyone took a block home and put a picture and a signature on it. Some were embroidered, some were done with fabric paint, etc. They sent them back to my cousin and then, we put them all together. My cousin sent a picture of the quilt to each of the baby shower guests that had returned a block to go into the quilt so they could see the finished project.
I do like the idea of putting freezer paper on the back of the blocks to make it easier to write on. We didn't think of that.