Some people are just clueless as to how much thought and work is involved in a handmade gift. They just don't get it. Now that you know, that's one relative you can cross off the handmade gifts list. There are plenty of people who would love to have that very patriotic quilt. I agree that you should get it back and keep it yourself.
I've had handmade gifts rejected too, so I know how it feels when someone you love doesn't value your gift. Don't let it stop you!