A high quality muslin, such as Roc-lon Avalon, would be great for this purpose. It's tighter weave means it does fray less than standard quilting cotton. If I was going to do a hand reverse needleturn appliqué project, that's what I would use.
As an aside, I would use Clover Black Gold needles for a project of this size. They felt weird in my fingers at first, but they glide through the fabric like butter! I use them for English paper piecing, and find that they really reduce my hand fatigue.