What a great idea. We did the same with my FIL's shirts after he passed on. We made teddy bears out of them and put them all in a black plastic bag and the grands just reached in blind and pulled one out.
I have some links here as to patterns to get you started.
http://www.ashevillequiltguild.org/A...or%20Linus.pdf
http://www.popularpatchwork.com/news/article.asp?a=5294
Besides this board this is a site with so much info and patterns.
http://quilting.about.com/
http://quilting.about.com/od/quiltpa...asy_quilts.htm