Wool fabric can be expensive, so I love it when I find a great sale. I found some wonderful 100 percent wool crepe on sale for $4.98 a yard. Wool crepe felts nicely without getting too thick. It stays soft and flexible yet still makes really nice water resistant bed pads, cloth diaper covers, and jackets. Of course, you don’t have to felt wool crepe to use it. Wool crepe makes nice skirts, pants or even diaper covers (if you choose not to felt it, just use two layers).
I find a lot of nice wool fabrics at Fabric.com. They also have really good deals on silk, flannel, and other fabrics. I have found some real bargains in their $1.95 a yard clearance section. Best of all, they have really cheap shipping, if it is your first order they will even ship your whole order for $2.95. Just use code FIRST. Many times you can get the whole order shipped for free if you order at least $35 worth of fabric.
Look for fabric that is at least 80 percent wool for most projects. For wool diaper covers and wool longies (wool pants that function as diaper covers as well as pants) , you want fabric that is as close as possible to 100% wool. For felting, 100% wool works best as well.
Look for quality fabrics, even for discount wool fabric. Cheap fabrics can be a bad deal, even at low prices. For some projects you can upcycle old wool skirts, jackets or sweaters for your crafting needs. That is another reason I like Fabric.com, their discount wool fabric is still great quality.