All the dishtowels I have ever seen were made out of muslin so you will have no trouble using them for squares on a quilt. We all use bleached or unbleached muslin for quilting. I think it is a wonderful way to use them and they will live forever in a quilt.
My daughter took an old embroidered tablecloth my mother made, cut it up and decorated a blouse for me, pieces went on the pocket, the yokes and collar.
Carol J.