SOLUTION:
Various fabrics like terry cloth need a topping to hold the fibers down below the stitching and water-soluble topping is not always the answer for a lasting quality design. Using the thin plastic of laundry bags can be used instead, if the stitching is dense enough to make a clean cut in the plastic. Another alternative is to use a kitchen plastic wrap, and though it sometimes leaves a slightly ragged edge along the stitching line, giving it a short run in a clothes dryer or using a hair dryer will shrink the plastic, hiding most of it securely under the thread.  The most secure solution is to lay down a light density filled grid (lines traveling in opposite directions) as underlay behind the design, using the same color of thread as the fabric.