I would also suggest doing a google image search for memory quilts. I got alot of great ideas. I made a tshirt quilt and in the bag were two plaid shirts that they REALLY wanted included. I used them in the border...and added another plaid from my stash (I am a firm believer in the ODD number rule. I don't like to use even numbers of things. They look well...ODD! lol), so I had three. Here is a picture of the quilt on my design wall. When the lady saw it, she cried. Nailed it! (one of the plaids was a seersucker type fabric. I think I fused that with the tricot fusible like I did the shirts.)

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I've done both, but my favorite was making small shirt blocks out of the shirt fabric. My friend was amazed at the result. The blocks had little collars and pockets. It was a paper pieced pattern from Quilters Cache, I think.

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When I made my DGS baseball t-shirt quilt I also used a couple of his jerseys. I cut the top part of the front including the curved neckline and the top three buttons. This idea was from the Eleanor Burns pattern that I used mainly for ideas and followed loosely. The jerseys are a poly or nylon fabric but I was able to use the same light weight backing that I used on the t-shirts for stability.That jersey front with the buttons was a hit and the first thing people noticed and commented on. So if you can use some of the fronts, intact from the western shirts, I think it will be a hit. Maybe even one of the back yokes would look good since they are usually interesting on the western shirts. Good luck, it will be loved however you decide to do it.