Hi! I have been making soft toys for thirty years, and I have used about every fabric imaginable when creating a toy. If these toys that you are making are for over age three years, the possibilities are limitless. If they are for very young children that still put things in their mouths, then you must be more cautious in your selections, and for infants even more care must be taken and in any case-- toys should never be left in the crib. Babies have been known to choke and die on a ribbon. Any part that can be torn off and swallowed is suspect, so if you see this kind of wear taking place-- it should be removed from use.
That said, for soft sculpture of plush toys such as small animals, I enjoy using wool felt. These small creatures can be stitched up by hand with a needle and thread. For larger animals, I like to use Mohair pile on a woven back. This fabric is expensive but very durable. The short versions of this material were once used as upholstery for theater seats and can really take anything an active child can dish.
Balls and blocks can be made out of quilting and sewing scraps and using variety of tactile surfaces such as satin, corduroy, velveteen and so forth, make for a very entertaing toy for a youngster. When using woven fabrics for stuffed toys, I like to line them with percale or muslin for added strength to stand up to enthusiastic play. Some fabrics, such as cotton or polyester velour can be used without lining so that you can take advantage of the stretch.
I like to use 100% wool fiber for stuffing children's toys. It gives a nice density and weight, is naturally repellant to dust mite and mold and it is self extinguishing when removed from the flame source, which makes it naturally flame retardant.