Can my Winnie the Pooh blanket be restored?

Find a quilting store and ask them about it. You should be able to have them use it for something. My Mom took our old blankets and put new material on the back so they would stay strong. She also framed then in a new border that was made to hang on the wall. The only negative is once you do it you can't the original blanket back, it is forever a wall hanging. Also, if the material is rotted it will not work, it will just rip along the stitching. I would take it to a quilter and see what they say you can do. If you have a local fabric store start there.