Sorry, we did not meet your dreams!!
Another idea ... what about fray check? I have no idea as to its chemical composition or potential melt-ability to the peeling stuff. I don;t suppose you would be lucky enough to have another peeling t-shirt to experiment with?
Looks like you just might have to pass it back to your client with the cautionary warnings! Surely they will understand, being that the "defect" is in their supplied t-shirt? hope so!!!