I'm assuming that the bubbling up is not that the fusible and the fabric are separating but that the applique is standing out more prominently since you quilted around it. some quilters work hard to get that look, but you need to decide if that's what you like. As one poster said, you could put some stabilizer behind it, but that also adds stiffness to the quilt that you may not like. If you want to try something to fix it, is it possible to release the blanket stitch and repress the applique? I might flatten out the applique a little more and then you could do re-do the blanket stitch. If you redo it on the machine, it will show on the back, of course, but you could do it by hand to keep it from showing on the back.