Conflicted DIY
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Well, Photograph it to it's best advantage and put it up for sale as a Beautiful Deep Teal/Peacock Vintage Dress, and see what happens. Put a price on it that you would be happy to let it go for, and if it isn't snapped up, make your cushions and have no regrets......
List it and see if it sells. In fact a theater group might like it. If it does not sell, then you can still make your pillows.
It is completely up to you. Even if you sell it, there is no guarantee that the person is actually going to wear the garment. If you sell to a place that specializes in vintage clothing, you might get a collector. If you want to deconstruct it and use in a different manner in your home, go for it. Let your gut instinct be your guide. Another way to look at it - try and sell it and see what is offered. If not enough to make a difference, then keep and use as you see fit.
If keepsake/memory dress, have a pillow made for yourself. If not consider donating to the local theatre high school group. Most high schools have "Donate A Dress" at prom time and many young girls love the vintage dresses. Also, check with your local senior citizens' groups. They also have "prom dances" and what a lovely gift to give.
If the dress has meaning to you, use it to make you happy. it sounds like anyone who saw the pillow you made, would be pleased also.
I have experienced similar conflicts. Do you like the material enough to cut it? If it will make you happy, go for it.
If it means that much to you make something else out of it
Thanks for all your replies. It was the color that knocked me out. Didn't realize the depth and richness of it. It is beautiful as a dress (albeit one with about a 16" waist!) and would be a gorgeous pillow too!
I would do some online research and see what it's value is. Then you can try to sell it on Poshmark, Amazon, Ebay, 5Mile. If it doesn't sell then you can do with it as you please. If it does sell you can use that money for a DIY wish for your home. I started selling on Ebay to clean house. Now I sell all types of items. I have nine people nationwide that search out things and offer them to me.