The first thing that jumped to mind is a quilt block that looks like a star. Then use it as a pillow. I agree that it needs to be something that is "snuggled" with once it's done.
As a former Hospice worker, we used to offer this service to families. Taking an article of clothing and creating a remembrance. We ALWAYS asked what they wanted. Most of the items we created were pillows, but occasionally (depending on the fabric) we made teddy bears. I also like the idea of clothing for a teddy bear.
Thank you for doing this for your friend. ((hugs))