I use Avery 8255, which is a matte finish full sheet label. I print them 4 per page usually. I do have to cut them by hand, but it's not bad. They also come off pretty easily after soaking in water. A little knife scraping required, but no gummy mess.
As for software, my wife creates the labels, so she chooses whatever she feels like. Generally it's either Gimp in linux, or Paint.net in windows. But she creates the labels by hand on drawing paper and scans them in, so not too much digital manipulation required other than adding Text.