:shock: You are brave!!! Beach towels are a great undertaking, but they will be fabulous!
I would suggest cotton yarn would be the best to choose. Sugar and Creme is a good, inexpensive yarn (since you'll need so much). I believe Lion Brand also has a cotton yarn.
I couldn't find any patterns for a beach towel either, but what you could do is find either a dishtowel pattern or a stitch pattern that you like and just go from there! If you do a small swatch to find stitches per inch you could do the math to figure out how many stitches to cast on and how many rows to knit.
Good luck! We are here if you need any more help!