I use cloth for pee only. I keep a mesh bag attached to the TP roll (which has TP still on it for #2). In the mesh bag things get aired out pretty well and frankly, there's not much pee on the cloth anyway. I have 8" square cloth wipes which are actually too big. I suspect the size would be just right for #2. When I'm feeling like it I use an old peri-bottle for rinsing before wiping.
Anyway, I throw them in the laundry with pretty much anything (except kitchen towels) every day.
As for benefits, for me it's mostly environmental (although it is more comfy than 100% recycled TP). The extra wash is minimal, so the cost of washing them is negligable since I don't use hot water (there's no #2 action going on here - otherwise I would feel compelled to boil them in hot water in the washing machine).
I like the fact that I'm saving money on TP as well since the majority of wiping is for pee anyway. And I'm not contributing to using paper products, even if they are recycled - there's a lot of energy and water consumed in producing TP from both virgin trees and recycled content. Plus, there's no additional TP solids going through the waste water treatment plant. (Our wastewater gets turned into compost, but still.)
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Crunchy Chicken