I'm more of a jeans and T-shirt kind of girl.
This was a pretty fun and inexpensive craft, although truth be told, I did most of the work. Maddie, however, did choose the graphics.
At any craft store in North America, one can find printable iron on material. I use Avery brand. It's the most widely available and probably the cheapest (and it comes with a boxtop for education for your school. Bonus). Using an ink jet printer, you find a graphic you like and print it directly to the paper. After that you can iron the image onto a shirt, tote bag, blankets (they make great customize quilt fabric squares).
The tee-shirts are available at most craft/fabric stores. I bought ours at A.C. Moore for about $3.00 a shirt and bought a few in case we messed up (which I did). The Inkjet fabric transfers cost us $8.50. It comes with six sheets so if you mess up (which I did), you have extra to work with.