When my daughter was in college, I made tshirts for her with her Greek sorority letters on them. These were letters that I cut out, attached down like we do for applique (may have used something like Wonder Under), and then satin stitched around them. I used freezer paper on the underside and sometimes regular notebook paper. Worked for me.
I probably would not try to use this in my machine embrodiery hoop, but it worked well for the tshirts.