I have a brother and I'll tell you how appliques work on it and maybe that will help you figure your's out.
1) The item to be appliqued (base fabric) is in the hoop. You let the machine do a "run around stitch".
2) Runaround stitch tells you where to lay the fabric you are going to applique. You let it run around stitch one more time.
3) You take hoop and all out of the machine and trim as close as you can to the run around stitch. The make a special applique scissor for this.
4) You put the hoop back in and the machine does the satin stitch.

That's the way this was done.
Good Luck,
Susan

I would look in your manual for instructions on working with a manufactured card. Every machine brand is different in that aspect.

I also like to use applique designs just for the outlines that can turn out rather neat.