You can only felt sweaters made out of animal fur (e.g., wool). It doesn't unravel when you felt it; in fact, it does the opposite. Because the fur wants to pull in tighter, agitating a sweater in soap and warm water makes all of the fibers cling to one another. It creates a dense fabric that you can cut and then sew. I actually just felted seven sweaters. The one that did the worst was cashmere. It ended up with huge holes in it. The ones that did the best were lambs wool and merino. When you felt the fabric will get smaller. I went through the xl and l racks at my local thrift shop looking for bigger sweaters so that I would have the amount that I wanted.
Good luck with your project; I would love to see the results.