I would think it all depends on the thickness and width of the rag strips. Why not experiment with what you have and find a gauge that you like?

If you can crochet, you would be able to make huge rag rugs and avoid the drag on your arms from holding up a heavy rug as you knit. Of course, I hope you plan on using circular needles to avoid arm fatigue.

What fun to knit a rag rug! We'd love to see the results when you are done!

I did one and for the life of my I don't remember what size needle I used. However the rug shed those strips faster than I could put them in. It was neat but not practical.