I would give it to her with a note explaining that after you washed it there was a lot of unexpected puckering, and that it may have been due to the batting used.
And I would include a "gift certificate" to make a replacement, but she can enjoy this one until you get the new one made. She won't feel left out, and I would think she'd be understanding. She may be very happy with this one as it is- who knows. And you can explain that a new one will allow for easier maintainence. She could end up with two and be twice as pleased.