To make this clear, the inkjet printer is not used to directly print resist onto the fabric. Instead, it is only used to print the circuit design onto the conductive fabric. You will then have to hand paint a clear resist over the inkjet image before the circuit can be etched.
See step 1 for details on a printer that may work to directly print the resist onto conductive fabric.
Alternately--an inkjet printer is not necessary--you can just freehand paint or draw on the resist where you want the conductive traces to be.
Pic 1 shows a simple circuit that that lights 3 LEDs. I made some of the traces circular to find out if they would conduct well at angles to the warp and weft of the fabric.
Performix (tm) liquid tape, black-Available at Wal-Mart or http://www.thetapeworks.com/liquid-tape.htm
Carbon Graphite, fine powder- Available in larger quantities at http://www.elementalscientific.net/
Available in smaller quantities at your local hardware store. It's called lubricating graphite and comes in small tubes or bottles.
Conductive thread-Available in small spools at: http://members.shaw.ca/ubik/thread/order.html
or at: http://www.sparkfun.com/commerce/categories.php?cPath=2_135
Conductive fabrics available from: http://www.lessemf.com/fabric.html
Clear Nail Polish
Ferric Chloride etchant available at: http://www.allelectronics.com/cgi-bin/item/ER-3/445/DRY_CONCENTRATED_ETCHANT_.html
or at: http://www.circuitspecialists.com/search.itml?icQuery=ferric+chloride
toluol solvent-available at hardware stores
Pic 2 shows the three conductive fabrics that were used in this instructable.
1-VeilShield-A mesh polyester plated with a blackened copper. Very light and 70% transparent.
2-FlecTron-copper plated nylon ripstop.
3-Nickel Mesh-Semi-transparent copper and nickel coated polyester.
pic 3 shows the back of the circuit and the glued components.
Step 1: Print The Circuit Pattern With An Inkjet Printer
Next is to glue a square of conductive fabric onto the center of a standard piece of copy paper (pic 4). Clear nail polish works well as it dries thin and fast (about 5 minutes). Glue all the way across the top of the fabric (the side that feeds into the printer) and then put a blob of glue on the bottom of the fabric to keep it stretched tight.
Then, print the pattern of your circuit board (pic 5) onto the conductive fabric. Sometimes it takes a couple of passes to easily see the pattern on the fabric.
An Experiment That Failed
I originally tried to directly print on the resist with an inkjet printer. I printed the pattern seven times on the front and then seven times on the back to make sure the fabric was well saturated with ink. Unfortunately the ink in my printer (a Canon Pixma MP500) was too porous or not waterproof enough to work as a resist. Perhaps there is some brand of inkjet printer that has an ink that would work.
Wax is very hydrophobic. As you can see in the next step, even wax crayons can be used as resist on conductive fabrics. So, one good possibility for printing resist directly onto the fabric, is a Xerox Phaser or Tektronix Phaser printer that uses a melted wax ink. This very good instructable http://www.instructables.com/id/DIY-Flexible-Printed-Circuits/ by ckharnett shows how he used such a printer to print wax ink resist on special copper-clad polyimide plastic sheet to create flexible circuits. These are expensive, hard to find business printers, but if you can get access to one, it may just work to directly print resist onto conductive fabrics.