I wonder what type of backing you are using, just to get an idea of what it will be like. If you have a sturdy backing, it might work ok. If you decide not to use batting, I would sew an x through the blocks in order to "anchor" them to the backing. They might just bag out, as you said, and generally not hold their shape, especially when washed. One way I could see this working would be to use fleece for the backing, still doing the SID for sashing and the X across the blocks. Fleece kind of "sticks' to fabric. Fleece is wide and lots of sales going on now. But I can sure understand that you don't wish to spend more money on this project. It would be kind of a shame though to have done all of this work and not be happy with the last one. So good of you to do this for your niece!