Felting with raw (unspun) wool is fun to. A blanket is a big project to start with though. You might want to practice with pot holders or something smaller like that. Basicaly you lay the wool out in a big square in layers varying the direction the fibers run in. You can lay coloured fibers into the top layer to make a pattern or use coloured wool through out. Then it's soap, hot water and elbow greese

Start in the middle and work your way out. I like to pour on a small bit of boilling hot water and use a bar of soap to rub down the fibers in a circular pattern. Once the whole project has been "squished" together I roll it up in an old bamboo blind like a giant sushi roll :LOL I roll the blind back and forth, unrolling to turn around the project from time to time so the fibers get worked evenly from all directions. How long it takes to felt will depend on what kind of wool you have. I like merino (sp) for baby things as it is soooooo soft.
I know some people who baste their projects into a screen bag (the kind of plastic screening you use for windows, you can by it off a roll at building centers. This keeps it together while you are working on it. I find that it can be hard to get the screen off without pulling up fibers. Some people will toss the screen bag into the washer to felt it but I find it comes out a lot more even and smooth if you do it by hand. Plus it's a great upper body work out!
Once you get the hang of it, you can felt over molds and make 3D objects. I like to use large bowls and make hats.