I do understand the concerns of the one lady. When I was a Girl Scout leader, we went to a camp and a lot of the art supplies were donated. We were supposed to make windsocks with crepe paper streamers. The crepe paper was pale yellow and grey. Let's just say, no one wanted to take their's home. And the magazines donated to make those paper beads had very little color. We didn't go the next year. And it was not because we were snobs - it was because the materials were not interesting.
I think it is important to show the kids how to recycle scraps and clothing - but I would also teach them how to make sure how to choose the fabric. When my first daughter was born in 1981 and I wanted a lot of baby clothes I went to thrift stores. There were so many little clothes - some were in great condition, some were severely stained. I picked through it and bought only what I liked. In one visit I spend $7.50 and came home with 15 outfits. My husband came home, I had it all washed and sitting out on the couch, he thought I had spent my whole paycheck on baby clothes. So I totally endorse taking in donations but let them know if they really don't like something to check further.