I love the suggestions so far. You could also simply make another ducky block, carefully cut out the old one, and hand sew the new one in place.
One of the problems with using a close satin stitch is that it tends to "cut" the fabric. Looks like this is what happened to your duck; the fabric was weakened by the stitching and pulled away from the stitches. Next time you might want to use a fusible (I like Misty Fuse because it doesn't make the fabric stiff) and a satin stitch that is wider and not so close together.
Also, did you was it in a top loader? The middle agitator is rough on fabric, especially when a fold gets caught. A front-loading washing machine is more gentle.
Edit: I didn't realize that these are machine embroidery. Not sure my comments about the satin stitching apply, as I do not have an embroidery machine.
Last edited by Prism99; 03-05-2013 at 05:29 PM.