sounds like its a tension setting ~ that machine should be able to run just about anything. Dollar store threads are a get-what-you-pay-for experience, but if you're using Coats & Clark, or Sulky, or Gutermann or Connecting Threads you should not be having issues. Every once in awhile a machine comes out of the factory with booboo settings, so maybe that's what is going on.
Don't give up, call your dealer!
EDIT: I recently dug out my Singer Futura 150 backup embroidery machine, because my good Husqvarna's are out at my camper for the wedding quilt I'm doing... for some reason my Futura does not like the Connecting Threads egyptian cotton... and I use that all the time with my Husq! Switched to Coats & Clark smaller spools of cotton from JoAnn's and the Futura is happy now. BUT my Husq machines only like the CT threads now