I think you may just need to finish what you started. You already cut up all of the 'blankets etc.' and to only do one quilt and return the rest of the square you already cut is kind of low. It is a project you already started, agreed to do, and you should finish it, even though you didn't do the pricing up front. To expect her to find another quilter to somehow utilize the squares you already cut is wrong and unfair in my opinion. (doing this you are giving back her remaining blankets - damaged)
So if I was in your position, I'd take it as a learning experience and just go with it being a gift. I agree with the fact that most who don't sew/quilt would probably consider 'Walmart' pricing to be what they would be thinking you are going to charge, and honestly it would not be fair to charge her the high price that quilter's deserve for their work, since a price was not decided on before you cut up all the blankets and started the quilts.
Since you feel that you don't want to do this again, I also agree with the others that you will be inundated with 'orders' for other quilts if you charge her what she is probably expecting (the Walmart price).
So again, I'd take it as a lesson learned - finish both quilts and give them to her as a gift.