Suzanne
I use a variation of your method to make circles; I use the sticky dots (office supply store) instead of the template – because they stay in place there is no need to mark the fabric – I make the running stitch, draw it up tightly around the dot and press the seam allowance against the sticky side; To get the dot out, I make a slash in the back and pull it out with a hemostat. The smaller dots, if they are white, sometimes I just leave them in place – the glue side is against the seam allowance and in a couple of months the glue is completely dry. And just a note of caution for those of you that want to try this method, never use the iron on any sticky stuff – tape, dots, labels-- because the glue will never came out of the fabric.
Lucia