it does have to do with durability also...most hand quilted quilts are kind of considered heirlooms, not meant to be used and abused and thrown in the washer & dryer...the quilts these service people receive get used! so the concensus is machine piece and quilt them so they will hold up. not that hand quilting doesn't hold up but that it will get abused more than it should. (the recipient may be reluctant to accept the quilt if they think it has to be protected and gently used)
as for the quality of fabric.... there are plenty of people who go find the $1 a yard 'stuff' to make quilts they are going to donate to different places, they seem to feel that if they are giving it away they should not put alot into it.
and there are plenty of people who just do not know any difference in fabric quality. then there are those who mean well and want to do something but simply can not afford more expensive fabrics...
all of that taken into consideration....you can 'shop' at thrift stores, buy good quality 100% cotton clothes in a vast color/print selection, cut the clothes up and make nice quilts with quality fabric alot cheaper than buying yardage. there are lots of ways to save without settling for less quality. i tend to be opposite from alot...when i am making a donation quilt i use the most expensive everything i can afford. even expensive batts....if i am going to cut any corners it's going to be on one of the kids play quilts that take a beating then get replaced when it's time. since i've been sewing for over 40+ years i can easily tell by touch if it's something worthy of my attention. if it's not, i don't waste any money on it...$1 a yard is not a good deal if the fabric is garbage. it is only a good deal if it is good quality.