It sounds like you want to hand appliqué your fabric shapes to a background square with the hand blanket stitch? I have a hard time doing needle turn appliqué on intricate shapes and can't imagine I would get a good result with blanket stitch. If they were simple shapes, I think I would machine sew a dryer sheet or similar to the wrong side. I would then cut a slit in the dryer sheet to turn the shape right side out and then hand blanket stitch in place.
If you are talking about using wool or felt shapes to appliqué down with a blanket stitch, you do not need to turn under the edges because they don't fray.