have you tried just a zigzag? will your machine do that? i very often use invisible thread with a zigzag when i have lots of colors in my blocks. use it in the bobbin too. the stich you show in your pics would work too. definitely use a fusible along the edges of your pieces. hand applique will take a long time but will be beautiful if you choose that option. good luck ps, i seem to remember a tut on using fusibles only along the edges posted here.