Option 1. Ruffle the fabric and sew to the panel - see the left panel in the photo below.
Option 2. Sew the fabric on as is and embellish with a ribbon where the two fabrics meet. (I like this one).
IF I decide to add the fabric - I will probably opt for stitch witchery instead of actually sewing them together - this way I can change it if I get sick of it.
Hubs hates the fabric option but he just doesn't understand where I'm coming from on this... In this case, his opinion doesn't exist.