Hmmm, interesting thought. Make chenille squares on the denim as backing but stop and start all around the edges the amount of the seam allowance you intend to rag on the other side. Sounds do-able!
I think I would cut the chenille on the back of the denim squares before sewing the denim squares together. It will be much easier and portable that way. The chenille should still be laying flat enough that you can sew the seams from the other side and you can wash and puff it when completely finished. Make sure to post a picture when you have it done.
PS. Make sure to keep the lint trap cleared when washing and drying rag and chenille quilts.