I guess the terry squares would dry faster...but the prefolds would be less bulk. Id probably use prefolds at first and then when bubs got bigger and needed more absorbancy use the terry squares or flats.
Formerly known as SPUNKBUBBLE
Laura - keeping up the trend of 'dodgy usernames' since 2007 Mum to Manaia and Jaye.
terry squares are HUGE on a NB baby, you could cut some down a bit (or cut up some towels and edge with bias binding) but having tried to use towelling flats on reasonable sized NB's I wouldn't recommend it personally. NB sized prefolds are really quite dinky and not nearly as bulky. Drying however I'd say towelling would be faster.
You could make yourself some bamboo flats NB sized - they would be less bulky, more absorbent and you could size them to fit and then use them folded up as pocket stuffers later on - can't snappi bamboo fleece unfortunately though.