Got a dozen regular cloth diapers from CottonBabies to use as burp cloths, found here. These are $1.75 each and they ship for free! Retail stores often sell cloth diapers too, like BabiesRUs, WalMart and Target. They are Gerber brand. I've heard that they work well as burp cloths, but I know the ones from CottonBabies are diaper service quality and SUPER SOFT! And they are actually cheaper than the gerber ones! You can buy as many or as little as you need.
Bought some caterpillar ribbon off of etsy and sewed it to each end. I did 13" strips, folded and tucked in the ends of the ribbon, and did a top stitch around the ribbon edges. They turned out so cute and will be perfect for new baby!
This would make a great gift too! I bought an extra 3 diapers and am going to make personalized diapers for a friend. I think she'll love them!