To make sure the design covers the bottom edge of the towel just right, I moved the template directly down about 1/16" (just a tiny bit) past the edge of the towel. Doing this will allow the stitches on the bottom of the design to sew completely over the bottom edge of the towel.

I removed the template and drew lines connecting the marks.

When embroidering onto terrycloth or any type of "lofty" fabric, I recommend using a topping to prevent the stitches from sinking into the fabric. A water-soluble stabilizer works very well as a topping (I like to use Sulky Solvy or Sulky Super Solvy).

Now it's time to prepare the applique piece for the design. I printed the dieline file (the "_DL" file included in the downloaded design) at full size with my embroidery software. If you don't have embroidery software, or if you can't print from it, you can embroider the dieline file onto a sheet of paper. Do this by loading the dieline file into your machine, hoop a piece of paper, and embroider the dieline directly onto the paper.

After you have printed or stitched the dieline, you will use this "template" to cut the fabric to the right size and shape. First, spray a piece of medium weight cutaway stabilizer with temporary spray adhesive (I use KK100). Smooth the applique fabric on top of the stabilizer.

Next, I sprayed the backside of the paper template with a quick shot of adhesive and smoothed it over the fabric.

Then I cut out the shape.

I attached the hoop to the machine and loaded the embroidery design (the file that begins with "Y" followed by four numbers). I moved the hoop so that the needle is directly over the center point on the towel and embroidered the design.

The first thing to sew is another dieline. After that dieline is finished, I stopped the machine and removed the hoop, but did not unhoop the towel.

Then I sprayed the backside of the fabric piece with adhesive.

I placed the fabric piece right inside the dieline.

I put my hoop back on the machine and continued embroidering the design. A zigzag tack down stitched next. This binds the applique piece to the fabric for the remainder of the design. Then, all the inside elements are sewed.

Continuing with the design, the satin stitch border sews.

When the design finished, I unhooped the towel and tore away the topping. If you there any small topping pieces left behind, you can use a tweezers to remove them, or wet your fingertips and gently brush them away.

Now that the towel is embroidered, it's time to make the hood. I laid the embroidered hand towel (which is the outer shell of the hood) flat with the wrong side facing up. I aligned the second hand towel (the inner lining of the hood) on top, wrong sides together. Then I added a line of fabric glue along the bottom edge of the embroidery, and pressed the inner lining in place on top (the rest of the towel will be sewn together later on).

To measure the size of the hood, keep the towels aligned together, and fold them lengthwise, inner lining to the inside and short ends lined up together. Position the towels with the design on top and the short ends on the bottom.

Next I aligned a 6" or 7" flat round object (like a plate, metal ring, or plastic lid) at the top right corner of the shape I just drew, and traced the shape.

Then I cut out the hood shape along the lines, cutting through all four layers of the towels at once.

Next I stitched the layers of the hood together. Keeping the two layers lined up, I turned the fabric inside out and made sure it was still aligned. I pinned in place along the back edge of the hood and sewed a 1/2" seam along the back edge only. Then to keep the fabric from fraying, I zigzag stitched along the outer edge of the seam allowance along the back edge only.

I turned the hood right side out again and aligned the layers along the front edge. I pinned in place and sewed a 1/4" seam along the front edge only, along both sides of the embroidery, without stitching over the design.

To attach the hood to the bath towel, lay the bath towel flat with the wrong side facing up. Measure and mark the center of the top edge of the bath towel. Then place the hood along the top edge of the towel, right side facing out. Line up the back seam of the hood with the center mark on the towel.