Why oh why, my question, too, why can't we learn to just say no when we mean no? There was another thread on here recently, similar to this, although the quilt hadn't been made yet. Women especially, need to learn to say no. I say women only because I believe it is a cultural thing that we all pick up for some reason. Pleasers, peace-makers, etc. We can even learn to say no in a nice way, but not with excuses. Leaves an opening for those who will ask for anything and everything to keep asking. Anyway, off my soap box now
Since you have not sent it to be quilted yet, I think you should fold it up and put it away for a while, let it rest. It seems to be making you feel more resentful as you go on with it and what is really the point of giving a gift that makes you feel like that. If you can't give it with no last minute strings attached, don't give it at all. You will be setting yourself up for more resentment. If you have a good relationship with your niece it should not be effected by this. If it is, the relationship wasn't what you thought it was anyway. You may feel incredibly free and lighter if you put this one away. Best wishes in what ever you decide.