We use yummy cotton flannel at our house! My thought is that I'd rather their PJ's burn off of them rather than melt onto them.
That said, here's the "official" word on children's pajamas, including label you can add that doesn't specifically say NOT for pajamas, but issues the "buyer beware" for consumers.
http://www.cpsc.gov/businfo/regsumsleepwear.pdf"For child's safety, garment should fit snugly. This garment is not flame resistant. Loose-fitting garment is more likely to catch fire."The things you have to think of when you're selling things, whew!
Still flannel fans,
Sara