I would try to get to the bottom of it. There may have been misunderstanding if you thought the quilts were going to directly to children whose famileis use the House and either (1) the director understood this and did not convey this correctly to the staffer; or (2) the director did not understand your wishes and thought it appropriate to use them in fundraising as it wished. There is also the chance that (3) the director chose to ignore your wishes, in which case your kind offer of a donation should have been declined.
It may truly be a misunderstanding, but the director needs to reposnd to you. If sufficient time (at least a few business days -- she may be out of the office) has elapsed and you did not get a follow up from the director, you could write a letter with details of your concerns to corporate office as well as the chairman of the local House board. About 10 years ago I was on the board for our local Ronald McDonald House, which functions as its own nonprofit. Unfortunately, we originally had a director who was disorganized and did not follow through on things. The board should know if the director is not doing her job. Not that this would be grounds for dismissal, but if it is part of an ongoing pattern, the board should know. The director is accountable to that local board. We hired a new director who has been doing a good job for the past 9 years.