I think it would be especially meaningful for your mother if you were able to use some of your own cotton shirts and/or pants in part of the blocks you make to surround the pillow panel. If you have some that are older or a little small, that she would recognize from seeing them on you, even better! All you have to do is cut off the seams and you then have usable fabric left from the front sections, the back and the sleeves!
I like the idea of adding an iron-on backing to the original blocks, but would add that a lightweight one would probably serve you best.
Stitch in the ditch just means sewing along the seam line of your blocks. I much prefer the second choice given by CarolynMT which is the 1/4" outline stitch as it is easier than following the previous row of stitching and looks very nice.
You are a dear son to be doing this for your mom and I know she will be delighted!