I would not ask the neighbour anything but just go ahead and make a baby quilt. Your neighbour has shown kindness to you for a number of years and this is a nice opportunity to share your own passion. I'm sure he knows you're a quilter. When I make baby quilts now, I expect them to go on the floor and use a cuddle soft backing. I would probably also make a couple of burp cloths as well. If you make the quilt without mentioning it first, it will be a nice surprise and you don't have to engage in any discussion about it. It doesn't sound like you're making it as a reason to try to make a new friend, but because you want to return a kindness that has been extended to you - even if you do pay for it.