Such a lovely treasure and you are to be commended for your caring and careful handling of it. I would agree with others that any quilting you add should be done by hand rather than machine. That probably applies to the lace application also. I like your idea to embroider the story. And, I agree, that the intended recipient needs to be older in order to appreciate this lovely work. I love your story. It must have brought great and loving comfort to her family and friends.