Originally Posted by justquiltin'

OK, I JUST bought the same machine with a gracie frame. I was having the same problem -- just never could get the tension right. Then, after fighting with it, debating returning the machine under warranty, etc. etc., I discovered it was ME. I was not putting the presser foot down! :oops: In which case, the tension discs do not engage, and you end up with HORRIBLE knots on the bottom.
I'm sure you're smarter than I am, but I thought I'd share just in case this was the issue.
Also, you might try changing the bobbin tension.