you might want to get the cotton fabric that irons on to the knit to stabilize it better.
Then you would just cut out squares, using a set seam allowance (1/4 or 1/2 inch) you could sew it all together by hand.
When the top is finished you layout the backing of the quilt first, wrong side up then the batting in the middle (or flannel if you want a light blanket)
then the top right side up.
You can use crochet thread, yarn or embroidery thread to create a tie in each square through all the layers.
Good luck, it is a great idea.