I use fleece and love it. Some people make piggie quilts and sew it all together. I choose not to do this. I use 4 layers of regular cotton towels and one layer of fleece on top. I have no problem with smell and it works great. I would never use anything else.
As far as cage size goes 3x2 for two females is the minnimum. Having a kitchen area on top helps keep hay off the play area. That's what I do.
With cage size I would recommend the biggest you can comfortably make. My girls are in a 3x4 with a 4x1 upper deck. I made it extra big so that I know they will get along, a 4x2 just felt too small for them.
Good luck and when you finish the cage and get your piggies, we love seeing pictures! Welcome to
GPC!