Sounds like a really good idea. I am fairly sure that tea tree oil is okay as long as it is diluted.

I too hate using baby wipes as they dry out DD's skin and gave her nappy rash the few times I used them.

Personally, I just have a packet of tissues and use a squirty bottle of water to wash DD's bum and bits, then wipe and dry her with tissues. If I don't have a squirty bottle handy, I just use get a bottle/cup of water, wet a normal tissue and use it like a standard baby wipe.