About those towels... they're awesome, but they seem to be getting harder to find in Japan these days. The banks used to give them away in the summer months, and martial arts dojos still seem to have a source. There used to be a teeny tiny shop near Ebisu station where they sold all sorts of towels, and had the nice terrycloth mid-size ones. It's long gone now unfortunately.
You can often find terrycloth handkerchief size items in the department stores during the summer months, or if you go to an onsen and stay in a pretty nice place you may be able to accidentally leave with a few when you check out.
Oh... generally タオル or sometimes 日本手ぬぐい. But I think that 日本手ぬぐい usually refers to the tighter weave (not terrycloth) cotton cloth you wear under your headgear in kendo, or what the sushi chefs sometimes roll up and tie around their head.