If you put it on first, then your quilting is going to go *over* the applique. If you do it last, then it will be "on top" of the quilting (and you would have to hand applique, to avoid your stitches showing on the front of the quilt). Given that it's a baby quilt, I'd be tempted to put it on first and quilt over it - that way it won't come off in multiple washes.