If you take that beautiful heirloom, and cut it up for a child's quilt, the child will take little time in destroying it. That might not matter to a young child. It may matter a great deal when that child grows into an adult and realizes that, in his childish ignorance, he was allowed to destroy a family heirloom. Because of that, he will not have the chance to see or enjoy it during his adulthood, or pass it on in his family. As I see it, that is taking choice away from a child.
This is the kind of thing that needs to be preserved and passed down. It's irreplaceable. Once gone, it's gone forever. There are people who restore quilts and fabrics. These are the people to turn to now. This needs to be preserved properly, for posterity. I would never "cut it up" even for a wall hanging. But that's not my choice. Whatever the choice turns out to be, I hope that it's in the best interests of preserving the fabric.
It is much too fragile for a quilt. I've restored quilt tops my Great Grandmother made, and they were fragile. I would touch this.
Best of luck to you!