I have used both regular cotton and flannel in an appliqued baby quilt. I used fusible then did a hand-sewn blanket stitch for accent and because of numerous washings in it's future.

That is a cute pattern & the quilt will be adorable. I think you can use any washable fabric and fuse it. I like the idea of stitching it down so it can't possibly come loose & the baby swallow it. Be sure to share pictures when you're finished.

I used some felt a couple of years ago, and it bled when washed. Just test first.

I will certainly post pictures...IF I can do it!
I started on the quilt today, deciding to go with colorful cottons.
Thanks to all that responded
Oh yes, I intend to stitch the appliqué down even with fusing.