Thanks again for all the suggestions. I finally just bit the bullet and ripped out the inside stitches on the bias edges far enough to pull sky back and put 3-4 layers of fusible web in the gap. Then I took my oil pastels, that I use in landscape quilts, and used the white to cover some of the lines that were on the edge of the wrinkle. It's not perfect, but looks better to me. I hope the niece will like it.

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What I've learned from this: Do NOT use any fusible web that says to iron only 5 seconds....I don't remember the brand, but I won't get it again! When you've removed the stitches on the bias tape & you're trying to pry the sticky on the bias tape up with the seam ripper....keep your other hand out of the way or you might jab yourself, OUCH

Do NOT use Wonder Tape to fill in the gap....it yellowed when I ironed & I had to pull it off.
I used Steam A Seam 2, double stick fusible web to fix this. It's the only kind I will use from now on!