I actually don't like the baby surprise jacket... not my taste. And in either way I just hate the way variegated yarn knits up... I tend to stick with solids or self striping.
But I chose to do the original blanket I had in mind. It's a sequence of blocks, and I am using yellow which I have tons of and the variegated. Since it's in smaller blocks it isn't as ugly to me, and the blanket I am doing is super cute so I think it will be ok.
Thanks you guys.