I recently repaired a quilt my sister made me, because the back was completely disintegrating (the back was made with an old blanket). My quilt though was not quilted, only tied, so it wasn't too much work to take it apart. I took it apart and replaced the back with cotton fabric, replaced the binding, and retied the quilt (while also adding more ties). Anyway, I would definitely replace the back with something that's maybe a little more durable. And I like your idea with the appliques. It's a really beautiful quilt.