The Creative Machine Embroidery blog just posted 5 tips for embroidering on terrycloth:
1) Always use a topper! Due to the high loft of terrycloth, a piece of stabilizer on top is very important. It’s best to use water-soluble stabilizer for ease of removal after stitching.
2) Cut-away stabilizer on the back of the towel will keep your design beautiful for years to come.
3) Match backing stabilizer to the density of the terrycloth. Not all terrycloth is heavy and dense, when choosing a backing stabilizer take into consideration the density of the material and use a matching stabilizer.
4) Hoop carefully, preferably on a non-skid surface such as a rug liner. All the time spent prepping for the stitching will pay off in the end, so make sure your stabilizer, terrycloth and floater are hooped securely together.
5) Tear away the excess topper carefully, then toss it in the wash to remove the remainder. If you prefer to not wash the towel right away, just rub away remaining stabilizer with wet fingertips.
Apply these tips to achieve a great look when making any of these fantastic projects: