Thanks for all the suggestions. I had the best solution ever come up on the weekend! One of my friends fell in love with it and she is a quilter, so I gave it to her LOL ... She has big plans ... she can have them and then have a beautiful quilt. Maybe I'll even remember to get a picture from her.
TexasTillie ... the embroidered squares are 7x7 and the actual square is 8x8. I used chalk and a ruler to make the lines / blocks and then I put an x in the middle of the block. This way when I lined them up, all I had to do was make sure my fabric was straight in the hoop, and then find the x.
For my next quilt using embroidered blocks - I have discovered that doing them individually is MUCH easier. Trying to get everything lined up perfectly straight is totally frustrating. If you look really close, you will see that one of them is off. And yet it looked perfect when I had it all lined up.
Also, I won't put the backing on when I do the embroidered blocks ... that part worked out well. But then you have to keep in mind that you will need to do some quilting to hold the backing together. You don't have to worry about the batting because it's been all stitched in with the design.
So that's my learning process for this one, off to figure out another one! I ordered a bunch of stencils and got them in the mail on Friday, so will be happily preparing another whole cloth (small one) using all the tips and info I have received from people here!