If you are super crafty with hand tools, you can make the blocks yourself (see: http://www.instructables.com/id/Build_Blocks/).
I'm not too good with powertools and wood, so I bought mine at a crafts store.
Sand the corners of the blocks with medium/fine-grit paper until they are nice and soft and you wouldn't mind your little kiddo handling them. Give the faces of the blocks a little rub, too, to get the store-bought feel off (and maybe the sticky stuff from the price tags).
At this point, you can paint or stain the blocks to give them a different look. Let them dry for at least several hours before continuing.