The flashback, which of course is told from Mama's point of view, clearly explains why Dee is the way we see her in the present. It explains her differences and the derision she has for her heritage and roots, which she is so quick to disparage and ignore. This paves the way for the introduction of the modern day Dee and explains her selfish actions in wanting the quilts - not because of the living history of her family that they represent, but because of their beauty alone.
This sequence through Mama's narration gives us a glimpse of how Dee's personality was formed and how this influenced what she became as an adult. She was very different from Mama and Maggie and always seemed to be an "outsider" in many ways. She despised everything about the way she was raised. One part of the story describes how she stood staring at the house burning down intently. This obviously raises the question of whether or not she actually set the fire that destroyed the house. We do not know if this is the case, but it is definitely a possibility based on what we, the reader, know about Dee.
Another sequence that is important is the dream sequence in which Mama imagines she is on a talk show similar to "This is Your Life." Dee appears and everything is magically wonderful between Mama and Dee. Mama realizes this is only her wishful thinking, but it is still an important look into Mama's wish to be closer to her daughter.
We learn about what Dee was like as a little girl and how much she hated her way of life. Dee is a very selfish and self-centered person. She doesn't want her mother's churn and quilts as family keepsakes, heirlooms to pass on. "Shabby chic" is fashionable. They are assets to her, but of the monetary kind, not of sentimentality.
Did you ever wonder if maybe Dee was the one who set the fire in the old house?