Cotton chenille is better than acrylic chenille which, IMO, isn't worth knitting with. Try knitting at a tighter gauge than usual (eg, smaller needles) to help prevent "worming," the sudden appearance of loops on the surface. Yes, it sheds, so knit carefully and don't make any mistakes that require frogging (lots of luck).
Wool chenille, if you can find it, is even better. Best of all is a blended chenille -- wool core, microfiber outside -- called "Touch Me" by Muench. After you're done knitting, you throw the FO into a hot washer and dryer. The wool part shrinks and felts, the microfiber fluffs up, and you end up with something that looks like the most fabulous velvet. Expensive, but an experience to knit with -- even a short scarf or collar.