OMG that's awful! Such a waste of time, effort and money! I personally don't like buying fabric from Joann's, Hancock's or Wal-Mart. I find them to be very "flimsy" and I don't like the feel of them at all.
When I need to be budget minded I like to go to Connecting Threads...huge selection and great prices!
So sorry that happened to you! I think a wall hanging is a great idea for the blocks that you've already completed.