Try water soluable on the top of patch. Could just be flannel poking up through the stitches.
S
Sounds to me that your needle is too big...try a smaller needle. You also may need to loosen your tension....or lessen the density of your "design"
I used a size 11 regular needle Would a blue tip or other special needle work better? The flannel is so thin I can see the needle holes around the letters. Thank you for helping