I've actually been in that situation, before I started quilting. My grandmother made me a pink and green quilt, with large raw-edged butterflies. This was in the 70s, and I was really disappointed - I thought it was just about the ugliest thing I'd seen. I wrote her a thank you note and used the quilt on my bed for a while, then it was folded up at the end of the bed, and then it went into a closet.
About 10 years ago, I had a cat who thought my quilt frame was a hammock. To protect the quilt in progress, I grabbed my old, ugly pink and green quilt. It's a bit faded now and shows wear, but after 30 years, it looks much more attractive than it did when I was younger. I still use it to cover my work in progress, and I enjoy the idea that I am hand quilting with her.
When I give someone a quilt, I also give up my ideas about how the quilt should be used. If they don't like it, that's too bad, and while it might hurt to think of it lining the dog's bed, it's not my quilt anymore. But if they don't say thank you, chances are good I'll never make them a quilt again.
Janet