I've been using cedar fence pickets for small projects...bird house, squirrel feeder, bottle opener etc. Although it does have some smell, I would think it's not the best to line an old blanket chest with.
That being said I can get cedar from a couple of saw mills here in SW Missouri...5/8 x 4 1/4 x 48 or at the big box store in either single boards or "aromatic" cedar packages that cover 15 sq.ft. each that are 1/4 x 3 1/2 random lengths. The cost per sq.ft. is not much different but it is about a half hour farther to get the saw mill stuff and I can get it in all different sizes.
To build a chest/box/etc. I would go with the boards. But to just line a chest or put on a closet wall it would just be the surface area and the thickness would not matter...right? So the prepackaged 1/4" stuff with edge groves would be faster/easier to work with...right?