I see you probably won't be making this sporran. But if you did, I'd use the hair in a way that wouldn't immediately be recognized as hair by others. In this way, the personal meaning it holds for the donor and recipient is kept personal.
Example: Braid four 1/8" to 3/16" diameter strands into a flat strip. Then use it to outline the top outer edge of a leather cantle. You could also weave various celtic knots as decorative appliques or closures.
Finish the hair by coating it with a resin or polyurethane coating. Use enough coating to protect the hair from damage and encapsulate it. A satin finish would probably look much better than a high-gloss finish. If you can model the leather cantle or mounting surface accurately, it would be much easier (and cleaner) to coat the hair before it was attached to the sporran.
Two asides: The Red Violin is a great movie. It's fun to watch it in several languages - the language of the actors changes throughout the movie (no matter what language you select), but no subtitles in the chosen language. Probably the neatest implementation of subtitles I've ever seen.
Finally, I'm surprised so many people find the use of human hair so repulsive. Wool is hair, fur is hair, there's hair on my head, and I wear all three quite often.
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