I'm so sorry to hear of your SIL's lack of style and her bad judgment. I agree with everyone else.... go ahead and make the quilt for the baby, yes they'll need more than one, but perhaps and more importantly, they might get a clue as to what 'family' means and how important these heirlooms are! Most of the younger generation haven't a clue as to what is valuable in this life....hopefully as they mature, that will change.
Kind Regards,
MaryAnna