Flannel and terry are both good materials to use - that's what I make my pads out of. You may wish to contact the organizers to make sure recycled materials are okay for the pads.
The other option is that you could make the bags to hold the kits in your sewing club. They could be made out of any material (including recycled clothing) - I emailed Celeste about the sizing, I can't recall for certain but I think she said that 9"x 11" is a good size. They need bags for the kits.