I have been involved with similar craft type items in a business model before, and I will be up front it is hard for customers to see the time investment in items like this. A customer sees a teddy bear, and thinks of the one they bought at walmart for $10.

I think that the best price point will probably be $29.99 with modest shipping charges (less than $10). With the right marketing to the upper middle class customer and for gift situations you can maybe get as much as $49.99 with free shipping, but I think that would be pushing it to get any volume. I would probably start with the $49.99 with an ad program focused on that customer and see how it goes. If it does not work lower the price.

If you are priced too high I think that you will drive customers to print off a picture and say aunt betty, gramma, or whoever can you make one of these with my old baby cloths. Also, people will copy you and take it to ebay if there is room for margin, and realistically with a product like that you will not beable to stop them.