omg!! rags???? wow.
i'm not sure what you should do. maybe keep what is salvagable to make into a wall hanging and pass on to your own grandchildren someday. perhaps add a patch on the back with her name and the years she lived and your name the date stating that you came across it and decided to save it. it looks to be in rough shape but it's still beautiful and definitly not a rag. although i'm sure my father would do the same thing with it.