Restoration?? Are you kidding? Nooooooooo. How on earth would you replace missing pieces of 100+ year old, sun faded, patina'd felt? Between that and the frame you'd spend more than the pennant was worth (and, you'd certainly devalue it for resale purposes).
I say let these priceless artifacts show their age. Sure, the Declaration of Independence's looking a bit shabby; but, nobody's about to trace over John Hancock's signature, just to make it look like it did on July 4, 1776.
It's a 100+ year old pennant. It's okay to look old.
If you want a happy medium, I recommend scanning the color of the primary felt color; printing it in the shape of a triangle; and placing the pennant atop this background, so the pennant appears--from a distance--to be one, intact pennant. Up close, you'll see the holes; and that will convince others that they're looking at a truly special (and unrestored) pennant. Everybody wins!
This is precisely how the Smithsonian displayed the Star Spangled Banner for many decades.
Just make sure the background is printed on acid free material. Or better yet, use felt ... if you can match the color.
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