I've heard of casket/coffin quilts before, but never have seen or experienced quilts at a funeral. I attached a few links to web articles that might be of interest:
http://www.womenfolk.com/quilting_history/mourning.htm
http://www.shadowmanor.com/blog/?p=169
http://www.kellybutterbaugh.com/graveyardquilts.html
I have heard of quilters making a Mourning Quilt that was draped over a casket then given to a spouse or SO (significant other) after the service.