When I use iron-on applique, I decide which look I want. If it is casual, I do a straight stitch about 1/16 - 1//8" off the edge. If I want to "hide" the stitches I use either monofilament thread OR matching color with a zig-zag. I just did one where the size of the zig-zag was 1.5x1.4 and it sure makes the stithes blend. When I want to showcase the stitches I use the blanket stitch and take my time. 2.5x2.5 is the smallest stitch I do with the blanket stitch. Usually I go to 3.5x2.5 or so. All of those options hold up well. Only the straight stitch option give a bit of a raveled edge.