Try putting in a new needle. I was having trouble the other day and changing the needle fixed my problem.

I would rethread again and check the tension and the bobbin area for threads or lint.

Who knew?!! This is a real eye-opener for me. Thanks.

purplefiend, I have to have my presser foot down when I thread everything or it won't stitch correctely.

A rule of thumb that works "sometimes" is that if the thread is loopy on the bobbin side it's the fault of the top thread, how it's threaded, etc.

Here's what I've done so far:

I changed the needle, changed the thread, re-thread the bobbin with the new thread, and thoroughly cleaned the bobbin case. While it's better, I think it could be better yet.

Question now...where is the bobbin tension screw. Is this it, where I'm pointing in the picture?

No the bobbin tension screw will be on a small flat metal piece that is curved around the bobbin and which the thread goes through. In your pix it looks like it would be in the vicinity of the semi circular piece of metal just to the left of where you are pointing. Check your owners manual to see exact area, and which way to turn the screw. It is usually a very small screw and should only be turned 1/8 of a turn at a time. I think you should check to make sure that there is no lint or loose thread in between the upper tension discs. Sometimes you can run a piece of dental floss between the discs to clean them, or a pipe cleaner. Always do all you can with the top tension before touching the bottom tension setting as that one ususally doesn't need adjustment all that often. :)

Yes, exactly. Then completely rethread everything and that usually solves the problem.

Sounds so complicated. I think I found the screw, it is green and very very tiny. I think I'll leave that alone for now. My owners doesn't mention a thing about the bobbin tension. :(

If your owners manual doesn't mention bobbin tension adjustments, I would leave them ALONE. Most problems can be resolved from the top tension anyway, and if it' s the botton tension it may need a shop visit. EVEN though the loose threads are on the bottom, it means that the top tension is too loose, try tightening that one until the stitch locks in the center of the two layers of the fabric. If your machine has auto tension controls it is a little harder to correct tension problems, but try making sure there are no pieces of thread stuck in the top tension discs, since that will hold the discs further apart which would tend to make the top tension too loose. I have a Brother Embroidery machine that does this and after a shop visit when the repairman showed me what the problem was, I just take mine apart and clean out the discs, and the problem disappears. The good news was that the dealer serviced it for free since the machine was only 6 months old the first time it happened. :D