Thanks y'all!
I will hunt down the Sullivan's Spot Remover, and the quilt is small enough to dry on a rack, so I will go that route (with blocking).
The funny thing is that I had been sewing with my walking foot for days after I oiled it, with no problems (after test sewing on white muslin). I think it was the extra bulk of the applique that pushed material up higher than usual and into contact with oil that hadn't been blotted. Whatever, I am grateful for all of your suggestions - and have learned something new in the process!
Alison