Good question. I think that if you make a well-constructed quilt, the quality of the fabric won't be an issue. The problem is making a well-constructed quilt with "cheap" fabric - if you applique, you are more apt to get frays, and pieced seams may pull apart. I'm not a quilt show judge, but I do know that judges don't have a lot of time to look at each quilt, so fabric quality doesn't seem to me to be a deal breaker.
Janet
Janet