I was thinking of using it as a panel... I also considered cutting each lettered block and sashing it out. Then add batting and a new backing. Finally it would need to be quilted again... I wasn't sure it would hold up to much wear and tear b/c each square has worn spots too.
I used to consider doing a kit like this for a baby as all the embroidery is cross stitch and would be something to do when out and about but after seeing how this quilt wore, I have second thoughts.