There is a video on QuiltersTV where they actually use the applique stitching as their quilting stitches in sort of a quilt as you go technique. I've not tried it, but it might work well on your potholder.
As Amma said, the quilting is generally done after the applique. Echo quilting is very popular around appliques, but really it's up to you.
If your block is a bit wonky, that probably comes from the pulling of the applique stitches. I cut my block oversize and starch it heavily. After I applique my pieces on, I square up the block. That works better for me.