i am sorry you are having a problem with the printing i can tell you from experiance i have been there i finally figured it out after reading alot of differant sites and trying differant ways now i am making my 4 th picture quilt first of all i had to get a differant printer i bought a epson stlus c120 printer because the ink it uses is suposse to be water proof ( just to let you know the ink refills are exspensive so i only use this printer for material and use my other for paper and other odd jobs)
at one time i used bubble jet 2000 and the bubble jet rinse but that was a pain in the butt to use the bubble jet 2000 ( unless you have time to soak the material in this before printing and letting it air dry then iron ) so i skipped that step and went to Jo anns and bought precut 200 thread count Pima cottonin white material on a sheet for printing it is called Printed Treasures it comes 12 sheets for about 40.00 i just print on it then wait a minute peel off the backing then soak the picture in bubble jet rinse mixed with cold water then ran the picture under cold water to rinse it ( do not wring)air dry, iron and sew it in a quilt !!make sure you only let the picture sit a minute and not more before peeling other wise it is hard to peel let the picture sit about 10 minutes before putting in the bubble jet rinse hope this has helped you let me know how it worked out for you
one more thing when the picture is in the rinse kinda swish it around i use a ruler cause the water is cold on my hands but dont let the picture fold or wrinkle up use a big pan so it can lay flat and has room to swish