You have your answer for the batting. As for .pes format--Brother started with software labeled Personal Embroidery version 1. Over the yrs they have upgraded the software to higher versions..the limits of the designs made in these versions only limit you according to the size of hoops your machine will recognize. I have the software version 5 and for editing/merging a purchased design that was made in a higher version, for instance, I have to reformat it to the lower version 5 so my software will recognize it. As far as the .pes versions. I've been instructed that all the Brother machines recognize all the .pes versions as long as the design size doesn't exceed the hoop size. So re the .pes 1 and 2..I think it doesn't matter if the size of design and hoop are compatible. I hope this helps you. And, of course, you know you can take any other format (.hus, .jef, etc) and reformat them to the .pes format. You only need the free conversion software--several are available. So you are not limited to only using available .pes designs!