Does anyone know if there is a free digitizing software that will do photostitch? I've got free PE Design Next 2 and it does the photostitch but it's not allowing me to save it. I also have MasterWorks II but it only does 4 color photostitch.

https://www.wingssystems.com This is the software I used when I started machine embroidery I don't know if it will do what you want it to do but it is worth a look.