How about doing something like the Indians do when they buttonhole stitch around holes. (Usually seen this also done with mirror sequins). Don't know what's it is called, but maybe someone on here can better describe it.
Personally, I would attached freezer paper to the back of the fabric. Then I'd cut a hole or use a paper punch (the ones they use for scrapbooking), then buttonhole stitch around it to keep it from fraying.
So sad about her son. You are wonderful to do this for her. Can you possibly include even a tiny piece of the blanket? Even a teeny piece may bring her some comfort.