I think I would use flannel with it and I would wash the flannel 2-3 times in hot water and also dry it on cotton. You may have to press it after but I would think the towels have been washed several times and flannel usually shrinks quite a bit and in my experience, it will continue to shrink for a couple of washes. I would think a good long arm would not have too much problem with quilting it providing the owner had a foot that would travel over the loops in the towels. I would think they would use a "scoop" foot or something similiar that is designed to travel over thicker/fluffy/loopy surfaces. Best though to check with the person you are going to have quilt it first or if you are planning on doing and have a longarm, I would make a "sample" and give it a try first to make sure your machine and foot could handle it. I haven't quilted on terry cloth.