I also had to put blankets, towels, and I think some face cloths in brown paper and sterilize them. However, I was also instructed to wrap the whole thing in tin foil and then bake them. I've done it twice now and no hint of a house fire! We didn't do the baby clothes though. That doesn't really make much sense to me. The other things were just for the birth itself I can't see sterilizing the clothing?
BTW, my doula reheated the blankets and towel in the oven before she opened them so baby and I were wrapped in cozy warmth right after the birth! It was heavenly!