I don't think you're doing anything wrong either. I also believe some of the manufactures use "the wrong thread" as a cop-out. My impression is the cheaper threads create a lot of lint and if you don't get that out of a machine -- clean the bobbin area regularly, then you WILL ruin the machine! I have a Janome that has sewn countless miles in the last 5 yrs -- NO problem with it. I have had a Pfaff Grandquilter (longarm) and a HandiQuilter avante now ---and both of them will sew with just about anything. The Avante doesn't like the most EXPENSIVE thread I've purchased -- the Superior Lava. But it works great on the cheap Coats and Clark thread. I DO clean the bobbin every time I change it. Also -- doing the regular oiling your machine requires is important.
As for the thread for appliquing --- I just use regular sewing thread -- Coats and Clark!!!
As for irons -- I've had pricey one that died in a years time -- took my cloth with it!!! I bought a $35.00 one from a mercantile and it's still ironing good but it's heavy. I bought a $9.99 (got it on sale for $7.99) small lightweight iron from Walmart and WOW it's the BEST iron I've had yet!!! I am trying to remember to pick up 2 or 3 just in cast for the future!!!