I've used muslin from a fabric store and acrylic paint as well as dye. The paint works much better than and dye and dries quickly. Tyvek house wrap makes great backgrounds and it takes paint easily.... but it is a bit slick, be careful walking across it.
Check on eBay for some background deals, because by the time you spend the money or material and paint you cab usually buy one that will look better than what you make. Backdrop Outlet
Usually has some good sales this time of year and they often sell them over eBay, I got a $350 muslin for $99 from them on ebay last year and it's wonderful.
Lees Photographic Supply
Also offers some very nice backgrounds at very reasonable prices.