I have made quilts from baby clothes, but they are more for memory quilts. They aren't meant to be used by a baby, more for display.

I have made four of them. I cut up the clothes on the last one leaving as much in tact as possible and appliqued them on Warm & Natural sort of crazy quilt style in squares. It came out extremely heavy but that is what was requested. The ones I made for my daughter and myself from my grandsons quilts I used muslin as the foundation and did them in squares, again sort of crazy quilt style. The pictures of the last ones were posted on the board around the first part of April if you are interested in seeing what I meant about appliqueing them on. One was all girls clothing and the other was all her bibs.

The one I made, I stablized the knit before cutting the blocks. After assembling it, I didn't put any batting in and used flannel as the backing. Turned out great!