I do this all by machine not by hand anymore (I do machine applique with a satin stitch). I enlarge the photo and trace the photo with all the color changes onto plastic then enlarge to final stage. Trace the pattern pieces onto fusible (like Wonder Under) and rough cut around the pieces. Match up the pieces with right fabrics. Fuse the pieces to the fabric, cut out on the traced lines. Fuse pieces onto parchment paper placed over the pattern, tucking under where necessary just like you would with hand applique then put onto a background to stitch. I have done Cynthia England's lighthouse as an applique rather than paper piecing! Going the other way.
photo
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tracing
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fusing
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satin stitch all by machine
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ready for quilting
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