It really does depend on the designs you're using - the blanket stitch has a homey-er, cuter look, hand applique tend to look more elegant (both in my opinion, of course).
Do you want to do the applique in the middle, or more toward an edge? Would it be easier to accomodate on your machine, or in your hands (making sure in both situations to not stitch corners or sides INTO the applique! Not fun to do!)?
Good luck, whatever you choose!