Step 2: Form your blocks
To make the block perfectly square, I used a planer/joiner. Join a face, then join an edge, then plain the opposite face to the first face you joined. lastly, you can join the final edge, or you can cut it the last edge with the table saw. Make sure your piece is now 2.5"x2.5"x length.
Now, take your piece of wood and cut it into 2.5" pieces using the compound sliding miter saw.
Note: Wood holds a lot of moisture, and will change shape/size once cut. Depending on your climate, you may want to make your piece slightly larger, let it sit overnight, and then finish forming it the next day, so it can leech some moisture.