Rapaire, a few minutes of low heat in the dryer isn't going to felt your blanket. Knitters 'felt' their projects by putting them in water and agitating. Most do it in a washing machine. Here's a link:

http://knitting.about.com/od/felting/ss/hand_felting_2.htm

I am sure that the problem with your blanket is that the white lint and the wool fibers are attracted to one another by static electricity. A fabric softener will cut the static.

But if the blanket is a treasure, why don't you contact the Pendleton people and ask their advice? They probably have a web site and a 'contact us' link.

By the way, I don't believe any of that stuff copied above about the dangerous chemicals in a Bounce sheet.