i would be more like 1/4" - 1/3", but play around and see what you like the look of. a lot depends on just how thick the batting is. and how puffy. is it poly? they're very high-loft. you want the back to to looks as nice as the front. or as close as possible, for most people, that never really happens, but you can get close. also, on high-loft battings, the more space you leave, the more you see the puffiness. if you stitch too closely, you'll flatten it all out and the stitches will be very obvious.
also, from what i saw in the pictures originally, the bobbin threads were too tight, so they should be loosened a little. ''little' being the operative word.
and you don't want to do all of the adjusting from one side usually. i know it's a pain, but you may have to play back and forth, bottom and top, until you get it balanced. in your case, start with loosening the bottom. just a little. after that, you MAY have to tighten up on top. a very little. lefty-loosey, righty-tighty. facing the screw.
remember, KEEP NOTES. when this is over, you want to go back to start, because the next project will be different batting. some people never change batting just for this reason, and have a different machine for regular sewing. if you garment sew, then you have to re-adjust everything. so keep those notes.