Give them back.
I NEVER took clothes from anyone who said they wanted them back. I didn't want to be responsible if something got stained, etc. I just gracefully declined.
My sister lent me a cute pair of skeleton pajamas when my son was a baby. She wanted pictures of him in them because my nephew had worn them as a baby for Halloween. Other than that, I didn't take anything that needed to be returned. It was just my policy and it worked out well for me.
Garage sale season might be over, but check churches in your area. Many here where I live have bazaars and clothing closets at this time of year. Consignment shops are another good resource. You can get some pretty great stuff for little money. We also have thrift stores that have fabulous baby things. If you find a good one, check back often because the really good stuff doesn't last long. I volunteered at a thrift store (proceeds go to an animal shelter) and clothes are only 25 cents on Fridays.
I would just give the clothes back and avoid any drama. I know it's inconvenient, but this is why I never "borrowed" baby clothes. It gets too hard to keep track of what's what, I didn't want to be afraid to actually use the clothes that needed to be returned. To me, under those circumstances, it feels more like being responsible for storing them for someone else and I'd rather not.
You can find other things. They will be yours to do with as you please.
Just my opinion.