Thank you for raising this interesting question. Jenny has a new tutorial out that uses raw edge appliqué. I have picked out my fabrics for this, and I am using batiks.
http://www.youtube.com/watch?v=pcj9I...VFDHmDXqCIzuAw
She says that cutting on a bias edge keeps it from fraying. I hope she's right! It's such a cute pattern.