I was trained that in situations like this, you ALWAYS find something nice to say - then move on. No matter how horrible the project, search until you find something "nice".
"Oh Mary, I love those little bears (pause, looking over the quilt...) beautiful job, beautiful".
You don't know the circumstances of the quilt, it may be her first, it may mean something really special to her, or it be there's nothing that bad about it - it's just not to your liking.
Bottom line, everyone may not be as perfect as you are LOL