Wow, that's a great idea for the blocks! I thought immediately that I would piece the blocks in the order they joined the union. I could also do it alphabetically or by the size of each state. And for the backing, I thought to use either a flag patterned fabric or piece together red, white, and blue to make a big flag for the back.
I love the idea of putting them in order of when they joined the union. I think I might steal donniesgirl's idea of putting the date the state entered the union as well as the state name on each block. Now I just have to figure out how I want to do that when the time comes!