I always wash flannel before using it, partly to get the shrinkage (and any color bleeding) over with and partly to find out if it's going to pill. I've had flannel that I thought was excellent quality pill, and flannel that I thought was lesser quality not pill, so I don't know how to determine whether it will pill in advance. The last flannel I used did pill, so I used it as batting instead of for the back. I wouldn't use flannel that pills, especially on a baby quilt. It will be washed a lot, and the pilling will probably never stop. I would worry that the baby/child might get the pieces in his/her mouth and swallow them, or choke on them. Maybe that could never happen, but I know I would worry about it anyway.