Just a note to declare victory over the pounce! After much gnashing of teeth and tearing of hair (and paper) I have won! I can't post pictures yet, but I was able to transfer the Pelican design for the morse onto velvet beautifully with pounce and then paint over it perfectly. Yay!
It turns out that my problem all along has been the paper I was using to make the transfer. Silly me, I was using regular printer paper. Somewhere (and I can't remember where) I read that I should be using vellum. I don't have any vellum so I printed the design onto card stock, and what do you know the whole thing magically worked! Happy day! My paint is now drying and I will able to frame up the cloth this afternoon and finally get started on this thing. I am very excited.