I have used muslin for lots of different things. I have used it to make a pattern for clothing which can be altered and adjusted before cutting into the expensive stuff. I've used it for doll bodies as well. Also have used it for piecing and backing, and for practice for machine embroidery and FMQ. I made a double wedding ring quilt, pieced and quilted entirely by hand--I used muslin for the centers of the rings and also for the backing. It turned out beautiful.
I've found that you can buy some muslin really cheap and it doesn't look too bad until you wash it. Some of the really cheap stuff shrinks and wrinkles so badly after washing that it won't smooth out no matter what you do to it. I would suggest that before buying an entire bolt of muslin, that you purchase a small piece of the exact same kind and put it through the washer and dryer and then see how it turns out.