I would fix it as is...yucky colors and all. Here is what I would do. I would pull out the remaining ties, cut off the binding. Repair the tattered seams. Replace the batting and reuse the back if possible. Stitch in the ditch or send it out to a LAQ for an overall pattern. Then I would replace the binding with something appropriate. Imagine your step daughter's joy at receiving her favorite blanket back better than ever! Relationships are strngthened over things like this!