I haven't tried potholders yet but they would be much quicker so that makes them that much more fun :-)
I'm about to cut up the sheets I had all throughout college since they shrunk up a bunch (jersey cotton) and they're a pain to put on the bed, at least the fitted sheet is.
I have to agree that cutting the strips is the worst part but I just bought Gingher scissors at Joann's (50% off woot!) and they're a DREAM, I had no idea that scissors could vary that much from pair to pair. A bit pricey so there's no way I would have bought them had they not been 50% off.
At work, we have a heavy duty guillotine and that baby cuts through like 4 pieces of cloth no problem, so if you can get your hands on one of those, the cutting may end up being the fun part of your project :-)