Personally, I like to add both batting and backing and quilt it.
If you don't back it, the edges and seams will get all raveled and frayed and it won't look nice for long. Flannel backing and the pillowcase method would be fine, but I would put at least some quilting in it. Forty inches is a large area which will start sagging and bagging, especially if it gets washed a lot.
It will make a wonderful gift, I like the idea of the potholders and fabric bowl to go with it!