Okay, let's take this question by question!
First, you CAN make wraps out of wool, either stretch OR woven. The only difference is that you have to use a pattern MADE for woven fabrics if you're using woven fabric. Sure, you can use your pul pattern, just be sure that if it's a knit only pattern that you don't use a woven fabric, as the diaper wouldn't fit right...the "stretch" is built into the pattern for knit fabric patterns.
How do you prepare the fabric? Everybody has their favorite "best way", but I wash mine in the washing machine on the heavy duty cycle, in hot water with a cold water rinse. I check the fibers to see if they are as "tight" as I would like them. If they are, I put them in the dryer. If they're not, I run them through the same cycle again.
How do you waterproof it? Well, you don't, really. The thing with wool is that it absorbs 40% of it's weight in fluid before it feels wet. Felting it (the hot water/cold rinse wash causes the wool to "felt") makes the fibers more densely packed, thus allowing it to absorb more than if you didn't do that. Using the lanolin makes it more "clean" and allows you to go more changes between washes. When the pee in the cover dries, it reacts with the lanolin, and turns to lanolin soap, which is antibacterial, and flakes away. It takes a while for all the lanolin to be used up and turn into "soap". When it doesn't feel so "lanolised" any more, you get yourself some lanolin, put some very warm water in a bucket, put a few drops of lanolin in it, mix it around 'till it's "blended"-ish, and then dunk the wrap.
To wash, if the wrap gets very poopy or just needs to be freshened up, you have a few options. There's a kind of soap that has a bit of lanolin IN it to kind of boost it between lanolizings. It's called "eucalan". It comes in lavendar and eucalyptus scents. For regular washings, I use Ecover's wool and delicates wash, and that treats it just fine, then I hang to dry. If you want a "quick" dry, you can put it on a DRY heat source, like the TOP of the dryer (but I would put it on top of a flat fold diaper or something, to keep the lanolin from gooing up the top of the dryer) when it's running with a few loads, or hanging by the fire place (but not too close!) in the winter. It's enough of a bother to do that, though, that I don't do it very often.
