Choosing a sweater to felt:
Not all wool felts (shrinks) to the same degree so paying attention to wool labels is the first thing that will aid you in choosing good sweaters for felting:
Machine washable wool, in my experience, will not felt. Makes sense.
A sweater doesn't necessarily have to be 100% wool to felt. I believe a minimum of 70-80% is the rule of thumb.
Favorite wools to felt: lambswool, merino wool, some angora blend sweaters are very nice if they don't shed too much. Shetland usually felts well the first time but sometimes needs the encouragement of a second wash. Some cashmere felts better than others but all cashmere is wonderful and can be used as linings, for scarfs, baby blankets, etc.
A felted sweater is one in which you can no longer discern the knit of the wool--it all blends together.
I have felted a couple of woven wool skirts (vs knitted wool sweaters) with varying degrees of success. I plan to use this wool for craft accents.
Felting wool is part science, part art. I have purchased just a few 100% wool sweaters which didn't felt well, for no apparent reason, even if I washed them twice in boiling water. Maybe a dryer would have helped at this point--I'm not sure, but I've read that a dryer can help if a sweater isn't felting well. I've also felted sweaters, a large fisherman wool sweater from Ireland comes to mind, which I wasn't sure would felt well as the weave was loose. It felted so well that it was the thickness of a paperback book! I look forward to the felted surprises I find when I open my pillowcases. I've had a few disappointments but have been able to make things even with some of those--like a sleeping pad for our cat. Confession: I have thrown a couple felting disappointments in the garbage can.
Preparing the sweater for felting: I cut off the arms of the sweater and cut down the seam of the arm so that it lays flat. If you don't do this, the wool of the sweater arm may crease in the wash. I leave the bodice intact as I haven't experienced the same creasing problem here and sometimes Tayta likes the bodice intact for particular purse patterns.
As I mentioned before, I do a batch of like colors (especially with reds which tend to bleed like crazy) and each is enclosed in an old pillowcase so that fibers don't mix. Rubber bands will have to be replaced periodically and someday when I have time I will make zippered pillowcases.
Cleaning tip: Since I am drying my sweaters outside, I take the sweaters out of the pillowcases outside, give them a few good shakes, and the pillowcases as well. Some sweaters shed a little, some a lot. Maybe a dryer would take care of all this lintiness.
I also run a bleach load with the empty pillowcases periodically, to keep my washer clean. I read that somewhere out there on the world wide web.
And just because I like doing it, I steam/press all my wool and make lovely color coordinated stacks.
A couple more sources of wool felting inspiration:
Warm Fuzzies, by Betz White
This is the other book on felting that I own and it contains a lot of fun, do-able ideas. The projects are more finished/less artsy than the ones in the Sweater Chop Shop--equally inspiring, but in a slightly different direction.
Kris, who blogs at RESWEATER is one of those artisans who has expanded my repertoire of ideas of what can be made from felted wool. Check out her blog for lots of inspiration. She also sells sweaters for felting.
Edit: Here are a few great tips from Kris: A post which discusses working with wool blends and couple more comments:
Washable wool is treated, so that it will not felt. For felting, avoid the wording "machine washable", "washable wool" or "superwash". They should say "dry clean only" or "hand wash cold". Merino wool is the most common wool that is treated to not felt.
You do not need to felt a sweater until the knit disappears to be able to cut without unraveling. I like to "lightly felt" chunky knits, so they do not get so thick that you can't work with them.
And since I've been too sick this week study much or bake, I finished my intended Christmas ornaments this weekend. One thing we do have in Mafraq is pine-cones, so all my Christmas trimmings are focused on using that beautiful element to the utmost. The head, cap and scarf are made from wool scraps--the head from a sweater that didn't felt! Inspiration was found, where else. Oh, and I modified the hat template from Martha Stewart's site, here.