OMG that is just too, too cute. I love it! The colors you chose are perfect. I think the sheep stand out just fine against the background. I would definitely make this quilt.
Can you elaborate what applique method you used? Is it fusible or needle turn? I can do fusible but I am really awful at needle turn and I am equally bad with freezer paper method where you press under the seam allowance. I just have so much trouble getting nice clean edges. Once they are turned under for me I have no problem hand appliqueing them on. Fusible I can do very easily and do a satin stitch or blanket stitch around the raw edge. I also love the swag border treatment so let me know how you did that too, if you did it different then the sheep.