For T-shirts, I've had good luck online with blankshirtstore.com and cheapestees.com. I also found some inexpensive Hanes shirts in solid colors at WalMart, and the the ringer shirts at Old Navy are cute for little boys.
I started out buying Avery transfer paper at K-mart, but then ordered paper from eBay. It was much better quality for a lower price! I can't remember the seller's name... I bought it because J&N's mom recommended it on these boards.