I use peroxide to pre-treat whites with stains. It acts as a mild bleach and has gotten out all mannerr of spaghetti, blood, red wine stains. Never tried it on colored clothing.

If it has mold on it, I would suggest wearing some sort of mask as well as gloves while sorting and washing.....

BE careful using peroxide. It is a bleach. As a nurse, I always used it to get blood off my uniforms. I would be careful using it on colors unless you don't care if the color fades. I question peroxides' ability to kill the mildew spores also. If they aren't killed, they will come right back.
Sue

I just hate the thought of throwing all that fabric away. But I'm concerned about using the fabric, even though it is in plastic, that was near the fat quarters that definately have mold on them.

hmmmm.... i am in the pitch it camp. there are other fabric hauls to discover with less health risks.

I noticed that nobody ever mentions using Borax nor Washing soda to remove odors. They have always been reliable for me.

Vinegar can be very effective--soak like colors over night in a bucket with two cups of white vinegar. Drain and wash as usual with hottest water cycle and a cup of vinegar with the detergent. BTW, when I use this to remove eau de German Shepherd Dog after my son and his dogs visit (washing machine, only) my laundry does NOT smell like pickles--just clean and fresh. Dry the fabric outside if you can. Sunshine is a germicide and mildew killer.

Borax, yes. I meant to mention that but couldn't remember the name off the top of my head. That's worked well for me in getting smells out.

I'd wash it first too with oxiclean to start. It may take a few cycles to get the smell out. However, once washed and dried, I would give the fabric a stress test. If it has been stored improperly for a long time, it can be brittle and of poor quality.

When you all mentioned Borax and vinegar, would you wash the moldy fat quarters in that or just the fabric? I'm planning on throwing those out. I don't want to take any chances with the mold.