Hi GQ
Prefolds are awesome for newborns, I think I had about 6 when Miss M was a newby and I have about 18 now in prep for the next one. Yes you need a cover for them, I prefer my Mother-ease Rikki covers as they have leg gussets and seem to fit my chicken legged kids the best, plus they are awesome at keeping poops and leaks in. I never put an insert in my prefold, just folded, put it on, cover on - and away we go!
There are several ways you can fold it, you can twist it in the middle, and then put it under bubs, wrap the wings around and snappy. Or, you can fold it in three, and tuck the ends of the prefold under the flappy part on the inside of the cover (like mother-ease have flaps specifically for this reason). Or, I folded it in three, then flipped out the back to create wings, lay bub on it, fold up the part of the prefold between their legs so it doesn't go all the way to their chest (hehe), and then I wrap the wings around their belly so it touches the other part between their legs, and fasten with a snappi. Then put cover on. Easy peasy.
HTH!!
ETA - dry pailing is where you throw the soiled nappy into a nappy bucket with no water. They don't need water to soak in, just throw them in the washing machine and then hang out in the sun to help remove any stains and look all lovely again

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