Hi Familyfun and welcome.
What a nice thing for your coworker to share some of her stash with you. I would certainly take any gifts of fabric that she brings you.
As for your Dear Jane quilt project, I would use the best possible cotton that you can afford from the beginning. It is very much a labor of love. It can take years for some to complete a Dear Jane quilt. You want this labor intensive quilt to last as an heirloom for your family.
When starting a Dear Jane it helps if you can have a color theme for your quilt unless you plan on having a scrappy look. Look at any and all Dear Jane quilt pictures and see which ones you're drawn to. Hopefully you won't be like me and like them all, as I like all colors.
Do you have a color most frequently used in your home, then use that as a starting point. Do you decorate in country colors, modern colors? These answers may help as you select a theme or color for your Dear Jane quilt.
There are some blocks that are very difficult and many end of doing them a second time as your second block generally looks betters than the first. You could use some of her muslin to make practice blocks when you feel it might be necessary. These would end up being orphaned blocks.
I would inspect any of the cottons that she gives you. Some of the older cottons are much better quality than the newer cottons from the LQS.
I would buy a large amount of your background fabric that you want to use. I've heard that some have even bought a whole bolt. Many like the Kona Premium cotton which I believe is the very best Kona that they make. When trying to decide, get a 1/4 yard of each that you're considering. Take it home, write on the end salvage area in permanent pen as to what each is, brand, thread weight, etc. Then wash, dry and iron the fabric in preparation for using with your Dear Jane. This will give you an idea of which cotton you truly wish to use in your Dear Jane.
Then, once you decide on which you want to use for your Dear Jane background fabric, I would get a whole bolt of the fabric. I would use a discount coupon for this. Most use a 50% coupon and save them for their Kona purchases.
Then as you're working on your Dear Jane you can then start to collect the other fabrics for the individual blocks. Some have made sure that each block is made with a different fabric. Others have used similiar or the same fabric in different squares throughout the quilt.
When in doubt, you can make more than one....block and quilt! Also there are several support groups for Dear Jane quilters. Some are virtual, such as those at Yahoo Groups. Some areas have groups sew-ins and meetings, and some are groups that meet at their local LQS. I would check out what is available in your area.
I'm also wanting to start a Dear Jane. I've decided to wait until after I get moved later this year before I start that project. I want to be able to start and keep organized as I get each block completed.
Enjoy your fabric gifts and good luck with your Dear Jane.
Pam M