I would take it out. (I always say that it's not one of my quilts if it hasn't had a section taken out and corrected.)In fact, I have had to remove and resew more than a couple sections on a quilt I am making this weekend.

Many will not agree with me but in what I see in that last picture if you just sew it down with some matching thread you can barely see it's there! Or you could just slice it off as close to the binding as possible, your friend will probably never even notice unless you decide to tell her. JMHO

i agree with several others here ..take it out. it's not that large an area ..won't take too long to unstitch, trim ..restitch/quilt & reattatch the binding. you'll feel better about anice finish. ..and then just enjoy her thank yous' for the lovely gift, instead of a lot of time explaining to your friend about how you wanted to take your personal time to make her a quilt, but didn't care enough to take your personal time to repair the sewing error in the quilt.

I would just do a blind hand stitch, press well, wash and put my label over the as much as possible.

I did exactly the same thing when quilting my most recent quilt! I bit the bullet and took out all the quilting that was affected. I think you'll feel better about the quilt if you take the time to take out the stitches.

My first thought was also a label. But 16 inches is a very big label. Take it out and redo that spot.

I agree... I would fix it, especially when it's so simple to remove the binding, smooth it out, trim it off and reapply binding. You are lucky the folded fabric is right near an edge and wasn't quilted down.

The fix won't take any longer than hand stitching the fold down, and the quilt will be right instead of wrong.

I would undo binding , then pull ex-fabric cut then stitch binding back on. good luck ...

Thanks, everyone. I did indeed ripped, trimmed and redid it. Wasn't that bad. Just the idea that I thought was almost finished, only to find a frustrating mistake I couldn't live with. I'm happy with it now. Needs a label and then (if I don't screw that up) I can deliver my gift!

Glad you re-did it. I would have spent ages trying to think of anything I could have done BESIDES fix it and then fixed it anyway.
I'm sure she'll love it.

Watson