I would do set-in seams. Vintage quilts were often pieced by hand, and it's easy to piece that kind of seam by hand. However, you can also do it by machine. The key is to stop sewing exactly at the seam line (and backtack) instead of going all the way to the edge of the fabric. (This is on that inner corner.)
Here are tutorials that might help:
http://www.freshlemonsquilts.com/?p=1373
http://www.quiltuniversity.com/y_seams.htm