I'm so sorry this happened to you. I personally love the wrinkly look of my quilts, but I've never had them distort, or have the wavy binding you describe. You put so much love into it, and it really is beautiful I am hoping a good steam iron can do it justice. You stated you have a great relationship with you MIL, and you don't want the quilt to be a future problem for her. So be honest when she opens it, tell her what happened and tell her to give it back to you each time she wants to wash it. You can wash it and steam iron it for her and get it looking nice again! I truely believe it will be a beautiful gift.