RE: Prefolds - diapers to burp cloths?
Don't even bother with kool-aid. It won't take on cotton and they will be back to white after a few washes. The Dylon may do better, but is not considered a true fiber reactive dye.
I would get some Rainbow Rock dye at Hobby Lobby. They carry individual colors that come with soda ash packets in the box. You can even get extra soda ash which you may need with prefolds as they soak up alot of water. We tie-dyed t-shirts with it and they look great even after many washes. The process is fairly simple - soak in the soda ash solution for about 20 min and then apply the dye. Let sit for 8 hours then rinse well in cold and wash on hot.
Mama to three boys ('03, '05, '07)