Oh, what a wonderful gift!
As for the best yarn to use, I think we all have favorites, but a cotton or linen blend will hold up nicely. I haven't noticed a difference in wear between the inexpensive cottons and the more expensive ones, but I have noticed that the inexpensive cottons tend to lose color on washing.
I'd suggest considering her kitchen cleaning habits when selecting colors. For instance she may be the sort who bleaches her kitchen towels, so white or cream would make sure she can use it. If she's the decorative kitchen sort, then the world is your oyster.