I think the reason of the shredding might be the fabric you used; I sort of see that the fabric is not smooth on the chest of the duck. Is the yellow fabric the same as any other used in the blanket?
I have this set of applique animals and embroidered them once. What you can do is embroider the appliqued duck on a soluble stabilizer or a tear away and then applique by hand the entire shape on top of the one you have. It might be a little bit bulky so if I were you I would take the yellow fabric with sharp scissors and then applique. Don't get discouraged, remember that just you will notice any imperfection. I think the blanket is very cute and will be loved.
andrea