Tania,
Have you tried using a different/new needle, say one for only wovens, or a different size needle.
Have you checked your tension? It sounds like you bought a middle of the line machine so you should be getting good stitches. Don't underestimate the difference the needle can make in your stitches.
I like using rayons for applique,nice sheen and add a lot to the look.
Good luck.Aline

It's not easy at times going around outside curves and sometimes you do have to go around twice to cover. There is a method where you start reducing the length and width gradually going around and into a corner or point--couple test swatches should give you the points where to add and subtract.

thanks guys for your advice....i've taken the plunge though and bought myself a new machine...i'm giving the old one to my sister for xmas (i think she'll be thrilled). Anyway i've bought the Bernina 1008 and the difference is well noticeable. The stitches are much neater and seems a much more quality sew than the previous.