If it were me and she refused to pay the agreed upon price I would do one of two things.
First I would tell her since you agreed on $125.00, that is what I expect you to pay for it. (Loosing the cost of the materials you had to buy is better than letting her have it for $60.00.) If she resists still, tell her I will give you ten dollars for your grandfather's material since there is no real worth to it and all of the scaps that are left over and I will keep the quilt and sell it for its real value of $300.00.
or
If she is getting snotty about "her" material then I would carefully dequilt it and give her material back to her along with a picture of the finished quilt. Tell her half the work is already done if she wants to find someone else to do the work for nothing. Just a suggestion.