What a terrible experience. It's bad enough that a non-quilter doesn't realize what actually goes into a quilt, but for a "friend" who does - or did - quilt??
As she's indicated to you that she's not going to pay and that you should keep/sell it, I'd say you have every right to do so.
I do kind of like the donating it to a charity idea. Something good comes out of the whole mess. If you itemize your taxes, you could also list it on that as a donation & recoup a bit that way.
It's awful to see what the pieces donated by others have sold for. Yikes!! You might look into donating it to a charity that would not be selling it. For example, a shelter, a hospice, a Ronald McDonald House, etc. Depending on the quilt, and what the style is, you could request that it be given to a child, abused woman, homeless person, etc.
Look at it this way: You've learned a lot about doing business from this "transaction," and have the opportunity to make a sour project have a sweet ending.