I work primarily with heirloom quality quilts & used to work a lot with vintage materials. My SBS was with repro's, but I don't see why you would need to complete the quilting first. Assuming you are going to custom quilt it, it will actually make your SBS's puff very slightly if you needle turn them to the background & then quilt "in the ditch" around the applique. This can be done by hand or machine (I do my applique by hand & most quilting by machine). For the needle turn, you want to match your thread to the
applique (I use Aurifil 50/2). For the quilting, you want to match/coordinate with the background fabric (I most commonly now use Aurifil 40/2 unless doing fill work).
To best achieve the crinkled look, you want to ensure you are using 100% cotton fabric, batting & thread. The closer together your quilting lines & the curvier your quilting lines, the more crinkled it will appear. I like a 1" stipple for basic machine quilted vintage look items. If you plan to hand quilt it, I'd quilt around the SBS & do a curved cross hatch running right up to the applique (but in fairness, I am not a very good hand quilter); for hand quilting, I would not recommend W&N as the scrim makes it more challenging to needle.
My personal favorite batting for machine quilting is Warm & Plush. I buy mine by the roll from Walmart.com (cheaper than JAF with a 60% off coupon). It is not available in every JAF location, but there are stores that carry limited supplies. With Walmart, you can have the packages shipped free to the store; rolls ship free to your home. Warm & Plush does not have a scrim. It is a true 100% cotton needle punched batting. It is 50% thicker than W&N. W&P block beautifully, which is why I like it, but if you don't block it, it will crinkle slightly more than W&N, more in line with vintage quilts.
If you plan to hand quilt, I would probably go with Quilter's Dream Select. It is slightly thicker than Request. Request is the easiest to hand quilt, but provides the least definition -- which is why for what you've described I think the Select would give the best results.
As long as you work with cotton fibers & get the quilt wet, it will crinkle. The farther apart your quilting lines, the less it will do so. The straighter your quilting lines, the less it will do so. And if you add in fusible web, the parts where you have fusible web will not crinkle.
A couple of basic points about caring for the fabric that you probably already know:
(1) I feel pretty confident this is 1940's fabric based on colors & design. Colors from that era have been known to bleed. I would very gently pre-wash the applique in a laundry sink one at a time with a Color Catcher,
cold water & maybe 1/2 tsp of dye-free detergent. As each one comes out of the sink, I'd gently roll it in a towel and regularly check for any unattached dyestuff. You can either wet block or steam block them back flat unless you plan to needle turn them in which case it's really not very necessary.
2) I pre-wash all my fabrics in cold water, gentle cycle, Low heat tumble dry. I do this whenever I'm working with vintage fabrics or mixing vintage & modern fabrics. It does not impact the level of crinkling in the end.
3) I mark either with Crayola Ultra Clean markers -- or more commonly with vintage fabrics, with the Ultra Clean crayons. The crayons will usually come out with just plain water & a cloth. UC markers necessitate a trip through the laundry. If you do go this route, be sure to purchase a crayon sharpener.
4) When my quilt is quilted & bound, I either spritz it with water & gently use a damp terry cloth washcloth to remove the UC crayon markings or else I soak in the bathtub with a Color Catcher to remove UC marker marks. I generally leave it in the tub for 45 minutes in
cold water. At that point, I roll the quilt to push out as much of the water as possible without being rough and transfer to the washer.
5) I wash do the entire laundering process 2x. I wash on Gentle/Handwash Cycle in cold water with a small amount of Tide Free. When finished, I double check for any stray marks that didn't get removed & wash again if necessary. Then I dry it most of the way on
low heat. Typically because I like the crinkly look & want my quilts to be as soft as possible, I will repeat the entire process one more time. Cotton quilts tend to get softer with each wash, when washed properly.
What an absolute treasure that will be for your granddaughter. I used repro fabrics for my SBS, but even with those, I found my greatgrandmothers had made each of my grandmothers a dress of out two different fabrics that I had picked (without knowing). They shared their stories about what it was like growing up in the depression & what kind of dress their mothers made for them when they were little. I am making a Shutterfly book for my niece that tells the story of how I made her SBS quilt & have included the stories of her great-great grandmothers making her grandmothers dresses similar to the SBS dolls on her quilt. It is so beautiful to see how something as unpresuming as fabric can carry powerful memories of our family histories going back nearly a century ... and humbling to imagine that perhaps one day the quilts that we not make might carry our generation's story to those living 100 years from now.
I set my SBS's in a Single Irish Chain (both because one side of my family is Irish & because that pattern was designed around the same time as the SBS appliques) and was inspired to do circles & feathered wreaths by this quilter (). I did a full orange peel around all of my SIC squares & then did the reverse of that design, in miniature in every other box formed by the crosshatching I did near the edge. Then I went to circle-in-a-circle design for the inner border & rotating hearts in the outer border. Although those designs could easily pull attention from the applique, because I did it all in the same shade as the Kona snow (not a bright white since muslins in the 40's & especially in the 30's were creamier). Only the borders use contrasting thread.
I did find that I needed to add just a little bit of quilting within the SBS applique. In my case, my appliques were roughly 9.5" tall by 5" wide. Regardless of the batting, that's simply too far apart for vintage/repro fabrics to survive. I really wanted the fabrics to shine so right now I just did SID around the arms and (in my case) the hat band & band around base of dress. I'm going to end up hand quilting some additional stitching lines to ensure those fabrics are not unduly stressed from use and/or modern laundering practices. I'm also still debating whether to perhaps consider working some cotton yarn into them via trapunto -- but this has already become a far more involved process than I ever dreamed and I suppose at some point I just need to be done. My poor niece has been far more patient than any 4-year-old could reasonably be expected to be.
