You've gotten some good ideas for the quilt blocks so I won't add to that. Regarding the "liquid embroidery", when we were kids my sister and I did tea towels and pillow cases that my mother had used the iron on designs for us to trace/color. Many (and I mean many) years later I still have a few of the towels and one set of pillow cases. They had been washed numerous times and the colors are still true. I don't use them now, just kept them for sentimental reasons but they were used and loved in the past. I'm guessing they would work for quilt blocks, too, based on my experience. Maybe others have some answers, too, about this.