After a second look at the pictures-it is a rather big quilt and very lovely. How is the fabric holding up? It does look like it's only the seams.
I guess I'm not as sentimental as others. If it can't be easily repaired as a quilt, I'd cut it up and make several stuffed animals out of it or pillows with the better parts. Your MIL had already decided to thow it away. Then give one to MIL and the rest to the grandkids with a note as to where the fabric came from-if MIL likes the idea.
I know in my family, nobody would be interested in a framed piece of a quilt from great grandma's time. They don't have a quilter bone in their bodies.
But it is completely up to you. You know your family, their likes and decorating styles. You've been given many wonderful suggestions. Please let us know what you decide. I'm curious.