I generally make baby quilts either 45" square, or 45" wide and a little longer (50-55"). That way, you don't have to piece the back since fabric comes 45" wide. If you go wider than 45", and want a one piece backing, I'd recommend buying a sheet so you don't have seams

For the top? I wouldn't use white for a baby. Way too hard to keep clean, and if it isn't sparkling clean, it's way too noticeable. What about using pastel colored squares that pick up the colors in the print you find for the outside of the quilt? Your daughter could still do her artwork on the colored squares, but it would be much more practical--and I think, cuter.

Not a big fan of tying with yarn. It's bulky to work with (you don't want to discourage your daughter when she's working on her first 'big' project). I prefer embroidery floss--it's easier to use, and you can get any shade of any color you need. Another alternative is another decorative thread that's a little thicker than floss, but near the floss--comes in a sort of twisted skein. I've used that for tying quilts and it looks nice. Stronger than yarn, too.

For batting? I like the heirloom batting that Joann's sells. It's thinner than regular 'fluff'--almost like a thick, woven felt--but it's easier to work with, and doesn't shred, shift and disappear eventually, as the polyester fluff stuff does.

as to amounts of fabric? I'd go overboard rather than being too skimpy, if there's leftover, maybe your daughter might enjoy making some cute animal-shaped pillows for the baby, or some doll clothes. You'll probably need a yard of fabric for the center (but if you do assorted colors, maybe a half yard each of 2-3 colors?) Depending upon how big you make your center squares, I'd say you will need at least a yard and a half, maybe 2 yards for the blocks or strips around the outside. A yard or yard and a half of 45" wide fabric for the back, depending upon what size you decide to make the quilt.

Are you making your binding? or buying the premade? I'd go with an extra 1/2 to 1 yard if you're going to make your own. For quilts, I like to cut the binding about 3" wide--that makes it about 3/4" wide after you fold in half, then fold the 2 edges to the center.

Hope your daughter enjoys her project--what a lovely thing for her to do

Here is a good 'how-to' website with easy instructions for making a quilt baby blanket giving dimensions and tips:

http://www.make-your-own-baby-stuff.com/baby-quilt.html

Since you ask for any and all suggestions I would recommend for an 8y/o to make a hand tied fleece blanket if her goal is just to make a beautiful blanket for her new sister and not to begin learning seamstress skills. Most 8y/o have shorter attention spans and would get bored or frustrated if they don't start seeing the results of their endeavor in a short time.

With the hand tied fleece baby blanket you can still 'fancy it up' with applique in the corner if the new baby's name is picked out already (or maybe even adding "made by ________" in the corner) and if your GD still has interest in craft sewing after the blanket project you can go on to make a matching baby bib or stroller pillow.

Fleece blankets are very soft for a baby's skin and they are very washable. They don't photograph very well but they can be very pretty.

Instructions for tied fleece blanket:

http://hubpages.com/hub/How-to-Make-a-Blanket

Here is a link that might be useful: How to Make

I think having an 8 y.o. make a fleece blanket is a great idea, but I wouldn't then give it to a baby or put it in a crib with it, unattended. Baby could chew or suckle on the little strips and possibly choke.

Big sis could also make some little bibs for the little one to use when eating, when it's a little older!

I agree with Flamingo--a tied fleece blanket is an easy project for a beginner, but it's too dangerous to give to a baby.

However, 8 years old is definitely NOT too young to start learning to sew. She's definitely old enough to learn to measure and cut fabric, to use the machine properly, to sew simple, straight seams, to do the handwork necessary for finishing the quilt. I'm a home ec teacher and have often taught children of that age to sew--in a class of a dozen or more students. With grandma supervising only one, there should be no problem.