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Yes! Mealy peaches are much improved by baking. As long as they have pretty good flavor, they'll be fine in baked goods. Even my well-pedigreed farmer's market peaches are sometimes mealy, and I hate to waste produce -- so every so often I'll make a crisp. I prefer crisps for their forgiving nature and delicious, oaty topping, but i've also made cobblers and buckles, etc out of less-than-stellar stone fruit.
If the peaches are kind of blah tasting in addition to being mealy, you might add some more flavor with berries or a dash of lemon juice.
I also think it's probably the best way to deal with mealy peaches (or cook them with pork, it's a great combo), but it still won't be quite as good as a version with better peaches. I find mealy peaches are also not that flavorful, which comes out in the final product. But still better than wasting them!
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