I saw that at my bro's Wal-mart last month. I was kinda giddy because I hadn't seen fabric at a wal-mart for a while.
The selection and quality WAS better. AND they had more hip, current fabrics. Of course, there was some cheapy cringers there, but I've got two eyes, I can pick what I like!
I really think this is a good thing for their PR. Treat customers with respect like you're HAPPY they're there, not "this is what you get, deal".