I had saved the following website on making small wool quilts:
http://www.make-baby-stuff.com/felte...t-pattern.html
And this example of a wool quilt for inspiration:
http://www.apqs.com/quiltboard/viewthread.php?tid=5426
I think with wool seams you want to press them open with steam, and possibly even pound them open toreduce bulk -- at least, with felted wool. Dressmake weight wool might not need that treatment.
I would definitely not use less than 1/4" seam allowance; maybe more for felted wool so the bulk could be distributed with pinking shears or grading. For the seam allowance, I would probably do sample pieces to find out how the seam allowances will lay. Wool has different weights, so I'm thinking a lot will depend on the weight of the wool.
For applique, the website examples I gave are all of felted wool. Felted wool does not need a turned-under edge; raw edge is fine. Felted wool would not require a fusible.
For non-felted wool, I would make a few samples to see if fusible would work for raw edge. Or, for turned under edges, I would use a freezer paper technique such as Harriet Hargrave's.
Would you be doing the stitching around appliques by hand or machine? In either case, if you want the stitching to show, you would want to use a heavier weight thread such as pearl cotton. Again, I would make a few samples to figure out what is going to work best. (Incidentally, if you are doing the stitching by machine, you can simply treat two threads as one through the needle to make a too-fine weight thread look heavier.)
Weight can be a concern with wool quilts.