I purchased a circle template set called "Perfect Circles" made from a heat-resistent plastic. The circles are very thin and are not affected by the heat of the iron. I use the same method you showed, blue, and I use starch on the turned edge. The circle holds a nice tight edge.
I have a little bin of the circles from little scraps of projects. I plan to use the as flower heads on a rustic stem.
The templates are available from 7/16" to 2" in one set (4ea) and a bigger set from 2.25" to 4.5."