The simplest, clearest and longest lasting method I have found is to use Printed Treasures. You can get it at JoAnn's, it comes in both iron-on and sew-in (iron-on is too stiff for my taste), and if you add up the cost of muslin, freezer paper, bubble jet and your time, PT probably costs less...especially with a JoAnn's coupon. Right now it's on sale, too.
http://www.joann.com/joann/catalog.j...RODID=prd29322