I like fabric with a tighter weave - in fact, I'm very fond of batiks for applique. I like Kona, too, but more for a background than for the applique itself.
I don't do a lot of reverse applique, but for regular applique I turn under 1/4 to 1/8 inch. Less that 1/8 is too difficult, but when it gets to 1/4, sometimes it leaves too much bulk.
Janet