Since I am a lover of old quilts I would do everything possible to restore them. In the past I have gone as far as taking an old quilt apart that was really wonky and squaring the blocks and putting them back together with 30's sashing and borders. I actually find more satisfaction in restoring the old than making new.
Because the tears on the butterflies are so bad I think the only choice is to remove that row. I would definitely replace fabrics on the flowers. It is not that hard to find fabrics that will blend in. Use soft colors and use shades and tints that were used then.