What a shame - such a cute quilt. But be glad you discovered the problem yourself and not the new mother when she first washed it. She would probably feel awful that she "ruined" it. I'd use different fabric for the applique and maybe handsew in a new duck after removing the damaged one. It's odd that it reacted that way, but it likely will have more issues when it's washed again, if you leave the duck. His tummy looks as though it's pulling away also.