Marion,
Still trying to trouble shoot the issues you are having with FMQ. Try a topstitch 90/14 needle.
Are you FMQ over the applique? What speed is the machine setting lever on? Try a slower speed.
Next, try the same set-up and see if straight stitching has the same problems. It might be the turning and twisting of the quilt sandwich that causes the problems.
I use machine EMB polyester thread in the top and bobbin for sewing/quilting without issues. I made a small wall hanging using heat n bond lite. There were lots of decorative stitches right over the appliques and I had none of the issues you have experienced. The decorative stitches moved back and forth similar to your FMQ.
Is the HnB product old and gummy perhaps?
What batting are you using? Perhaps a different batting will work better.