I buy beautiful hand dyed wool felt online at
http://www.myriadonline.co.uk/dummy-cfelt.htmlIt is very difficult to find wool felt, most of the shops just sell nasty acrylic stuff. I use only wool or felt old wool blankets to make softies by washing them on your machines hottest cycle.
I have a felt tutorial with suggested stitches and a downloadable pattern at
http://ninimakes.typepad.com/nini_makes/2007/08/if-your-childre.html That tutorial will also give you a link to a stitch dictionary where you can learn any stitch out there. Hope this helps!