So with all the information gleaned here, and some website, I've made a screen, and tested it on a t-shirt.
Here is the original picture, my cat sleeping:
Here is the screen I made (used a brooding lamp with 250 watt bulb, 12 inches away for 12 mins):
Heatset using instructions from this site:http://www.jacquardproducts.com/products/paints/versatexscreenink/l0_instr_1.php
Here is the t-shirt:
Here is a closeup of the kitty:
I got the brooding lamp for a local feed store, and the bulb from a local photo shop.
I used photoshop to turn the picture into white/black high contrast, printed onto a transparency. You turn the picture into a grayscale pict, then use Threshold to make it high contrast. You adjust the threshold until it's the way you want.
Will be making the real t-shirts later with some friends who are coming over to play.