Um, I am going to be different- I like number 3. But I don't DISlike any of them, so whatever you do, it will be great.
The applique idea is cool, too.
Oh, and regarding Klue's technique, someone told me a hint about that- you use old/used fabric softener sheets. Then you are recycling and it's cheap! :-) This only works if your applique is small enough, though.