I'm having a similar problem with a bag I'm making. I don't know if I should do the project, or just give away the yarn!
I decided to use a bunch of yarn that a friend gave me, to make this bag, but I don't love the yarn. In the end, I'll need to incorporate other yarn that I love, to make it a bag I like; but I'm still doubtful that I'll be that crazy about the bag. I've started on the project, but I just don't know if I want to keep going on it. It's going to take a LOT of yarn to make, and it will be felted, so if I don't like it, that's a lot of wasted yarn, that can't be re-used!
I think I'm going to unravel it, and give away the yarn. I got two compliments from other knitter friends on the yarn, so I really should just give it to one of them, since they like it! I really need a new bag (a knitting bag to replace my old one), but I think I'm going to start over with yarn I love, and give away this yarn. It's the thrifty person in me that is stuck on this decision. So hard not to use free yarn!!