I've done it both ways and have no problem with either way, but then I don't mind the appliqué stitching showing on the back. However, there is another way I use occasionally. I appliqué on the quilt top and then put the sandwich together, then echo quilt around the general outline of the appliqué, then proceed with the rest of the quilting stopping at the echo line. On the back you just get the general shape of the appliqué without the stitching. Oh, yeah. Sometimes, I put the batting under the top and appliqué on just those two layers (sorta like trapunto without the puffiness). Then put it all together and QAD.