Our old Goodwill didn't. They waited until they had a lot of stained or holey stuff and then put them in boxes (the boxes weighed like 5lbs) and I'm thinking it was once a month put them out on sale. Maybe the first Sunday or something like that?? You weren't allowed to open the boxes, but they did have them.
Our St Vincet's does the same thing, but all you have to do is ask theh lady in charge of linens and she goes in back and grabs you a bag, they're a dollar. Some of thier 'rags' are nicer than my kitchen towels!
So I'm thinking if I wanted to donate them for that purpose I'd ask before donating to make sure they're not going to go in the trash.
Jess