I machine quilt with it. If I were hand quilting I would probably transfer the motifs to the top before layering and bypass the paper. I'd also look for a tracing/transfer paper you can use that would still make eraseable lines. I feel like I've seen it before, but I could just be crazy.
Not crazy, the product is called transdoodle. Works great but rubs off easily (and is a bit on the spendy side). I have heard (but have not yet tested) the much less expensive Saral paper works just as well. Can be found in the tole painting section of hobby stores. Comes in graphite and white.