okay...my 2¢ worth...
If a few small pieces like FQ, I wash my new fabrics with my regular clothes, soap and water, etc. and will use a lingerie bag sometimes. If I have any red FQ, then I wash with other reds or the like (DUH!) If it's a larger piece of fabric (yard or more), I snip the raw edges, a mere 1/8 to 1/4 inch, every 4-8 inches, so that if it was cut unevenly, it wont unravel all over my machine and tie the material into knots. Any excess threads get caught in the dryer filter. I've had the knots happen even with good quilt shop fabric, so it's not just with "cheap material". When ironing I do NOT use starch but use a Fabric Finish so it becomes "firm" again. Have not had any problems or surprises in all my years of quilting, so I guess I'm doing something right.
If you're getting a hole in the fabric, you might have a problem with your washing machine like something under the agitator is catching it??? or it's just cheap fabric (most of Joann's is from China now!!!!). It is 100% cotton, right? I've had holes develop in rayon and rayon-blends.
Good luck.