I think the sweater pillows are a great idea and maybe simple patchwork or applique pillows out of the other items. A pillow for a bed or sofa could be just a meaningful as a quilt and not nearly as time consuming. You didn't mention how many family members there are but it could be a LOT of quilts. I'm sure the family weren't aware of the work involved or the appropriatness (is this a word?) of the clothing they gave you to work with. Do what you can, do what you want, they will be appreciated.