Hang it vertically for the least amount of distortion, natural light is best and have an additional light source on one side to accentuate the quilting stitches. The side light will cause the stitching to be slightly shadowed and thus show more depth.
Quilt University has an online class on photographing quilts that you might be interested in. It starts next Friday and costs $36 for 4 lessons. Their classes are great.
http://www.quiltuniversity.com/index.html