There are instructions for applique on this site.
I'm kind of chicken too, but if I can master zippers, I can do applique... let's agree we'll both do an applique project and then remember to tell each other "it wasn't that hard!" :-)
bunnylane, applique in the hoop is fairly easy - once you learn the reasons why the color stops are made - you could easliy watch this video at Emblibrary and get your self a design - to stitch out and be prepared for cutting and taking your hoop off your machine - without removing your design. You should enjoy it - once you realize it is just a step by step method and each color stop has a reason for being there. *4U