How nice! I like that you've used something besides pastel pink or blue for a baby quilt. There's nothing wrong with those colors, of course, but it's nice that you're not feeling the constraints of tradition. (No matter what I type that just does not sound right. I don't mind those colors; honest!) Anyway, I'm sure the parents to be were over the moon with this gift!
Close it up in a plastic bag with some crumpled up newspaper. Every few days remove the newspaper and put fresh in. The paper will absorb the smells from your yarn. It takes a while (depending on the strength of the funk), but I've used this method successfully in the past. Airing it outside for several days also helps. Good luck!