Previously knitted yarn

i bought this sweater at goodwill today that is 80% lambswool and 20% nylon. i want to rip it and reuse it, but i’ve never done. can someone give me some pointers, like the best way to start and how to treat the yarn once i’m done, and any other handy thing to know. can i get the yarn to be nearly-new? thanks!

Here are a few useful links:
http://neauveau.com/recycledyarn.html
http://www.az.com/~andrade/knit/thrifty.html