craftgrrl | baby blanket is about to die

I'm looking for some crafty, domestic help....if this gets deleted, that's ok....I just figured you guys have a lot of crafty ideas and insight that I might not have....

This is James...notice the balled up blanket that his clutched in his arms while he's sleeping. That is his blanket...better known as "granky"...he loves it to pieces, literally.

This is "granky" when it's not all balled up. It used to be a very soft, very colorful blanky....now it is a bunch of holes with a few strings magically attached to it.

What can I do with this, how can I salvage it. The blanket is falling apart so much that there are constantly strings on the living room floor. James also likes to chew on it sometimes and that leads to string getting stuck in his teeth that I need to then pull out. Part of me says just throw it out, put the other part of me wants to atleast try and think of something else to do with it first. Any suggestions? I laughingly suggested this morning that we make it a wall tapestry of sorts in his room....then I envisioned him scaling the walls to rip it down.