I haven't read through all of the post, So sorry if I am repeating what someones has already said, but here is a little history about casket covers or palls as they are called
http://en.wikipedia.org/wiki/Pall_%28casket%29
And this may be kind of weird but if you do a search on funeral palls or caskets palls there is a lot of really pretty ones, so why not use a quilt.
I really like the ideas too, something that will last. unlike flowers that will be gone in a few days.