I have a lot of fleece scraps in all kinds of colors and that would work like the felt and doesn't fray. Just another option. I used the felt to make blankets for DGK's a few years back. Cut out letters and shapes and just straight stitched the edges, since fleece doesn't fray, it was good. Depending on how much applique, you might want to use 2 layers of felt/fleece, again stitchedtogether with a straight stitch. You could even add lace, ricrac, or any other embelishment!! Have fun, it sounds like a fun activity.