I just modelled a kind of U shape, look at the geo. Then I used one of the softer presets, can't remember which one, and dropped it on a cube.

This is just a really rough idea, but this kind of geometry might get you going. I've also found this site to be a great resource on all the different attributes: http://www.joelstutz.com/nCloth.html

When you say folded, are you referring specifically to the top part, where it's folded back on itself in front of the pillows?