I have put a few felt patches on things (not onsies, but other kids clothes...) and I've used wool felt. I'm sure you could use craft felt, but I just don't like the feel of it personally. Wool felt is more expensive and harder to find, but blends are easier to track down. All I've done is cut out the shape, hand sewn it on, and embroidered on top (if you want details like faces on animals etc... )but I'm not sure how the experts do it! have fun!