I too have pondered these mysteries of the Custom/Kustom car universe...
Custom with a K? maybe Barris. Maybe to differentiate the shop from others; a marketing strategy. hmmm...
a better question might be-why do people get upset by the way you spell it? Does calling your car a Kustom verses a Custom make your car better or worse or more authentic? hmmmm
yeah, before car heaters were standard in vehicles, it was a common thing to have blankets in a car, pendleton and other companies made blankets specifically for this use-I have a few. Got a couple from my grandparents that used them in Model T fords. Mexican style blankets in a car- probably the same idea-less-xpensive version of a pendleton. Key Characteristic of a car blanket is it's slim-not thick so you can carry it in your car and it doesn't take up a whole bunch of room-mexican blankets also have this characteristic and as the seat became worn out, it more than likely turned into a seat cover-or perhaps was used as a cover to prevent wear on the upholstery or keep dust off much like a furniture cover.