Straw or hay is fine. It's really just for insulation - it will keep him warm as the weather turns cold. Change it when it gets dirty - that just depends on the cat.

What I did with all my ferals was trap them, take them to the shelter for spay/neuter. The shelter keeps them for a week, to ensure they are ok. Once home - they get a huge dog crate for another week inside the house. Then I take the crate outside and let them go. They take off for the hills - but are back by next morning for breakfast.