My guess, certain parts are too dense. I am sure you have tried changing the needle already, but it might be good to change thread. Some of my black thread spools will break -- often!

I'm with Rescuer, I find when I get problems it's when the area is too dense. Love Chris

If you have tried what Rescuer has mentioned, I would be contacting the owner/digitizer of where you bought it. Maybe they have an idea on what to do.

Have you tried using the same thread etc with a different mug rug or coaster design, with a similar number of stitches, perhaps from a different vendor?

Yes...a poorly digitized design can cause problems...do you have other designs from this designer that stitch out well? Is this part of a collection of mug rugs and this is the only one that gives you a problem? Do you have software that will allow you to simulate the stitch-out of the design? If so, you might be able to see the problem stitches in the area of the design where the problems occur. If you have tried all the other "standard fixes" for problems, I would contact the digitizer. Take a photo of the problem area while it is in the hoop...it may help the digitizer see what may be happening. Sometimes there can be a problem when the digitizer converts the design from the native format into the various machine formats...a glitch could occur...or there may be some random small stitches within the part of the design that did not digitize well.

I would acknowledge that the design has a problem and slow down the machine if you really want the stitchout.

Thank you to all that commented on my question. Since my machine is sewing ok on other projects I have come to the conclusion that it is the design itself and not my machine or my choice of materials. This is a single design and not an expensive one so I wont feel bad about deleting it from my collection.