mhollifiel

There has been great advice offered here. I would not say a word to this young mother. If you are aware of all this, I am sure much has already been said and she has most likely circled her wagons in "love me, love my dog" mode.
I would make a quilted gift for her (perhaps a doggie blanket), make the pepper spray concoction in a previous post and soak the quilt with it. I would include a note that it has been sprayed to discourage the dog from chewing. I would not make a blanket type quilt to protect the children.
If this dog has put holes in the walls, I am pretty sure he can get to anything most anywhere. I am not the greatest quiltmaker but I will be dog-gone (pardon pun) if I am not going to make an effort to protect what I make if there's a way to make it less appealing to this dog. Best case scenario, it works and she asks for the recipe! Worst case, your niece washes the quilt and the dog gobbles it up and presents her with a huge vet bill.

Now I am going to pet our little rescue beagle mix Red whose tooth never touched anything inappropriate, give him a belly rub and a nice treat.