D'oh I forgot this was here. I use that same process, printed onto woven, then used the woven for the tags. I figured it wouldn't pull like knit would, but you could fool around with other things too.
You could incorporate fun clip art into your design too -- I used a fun font for my 'in house' label. This will be really fun for putting my own custom labels on Christmas gifts too
I cut them out using pinking shears, and put fray check on so it wouldn't fray. You could stitch and not use fray check, so it frays, it might be cute.
I also tried serging around it to finish off the edges but it didn't look very nice.
I tried some on grosgrain ribbon and it worked fine but I have not washed it yet.
This is with the pinking shears, I put it on some white clothes but it didn't show up well to post so I sewed it on some fleece:
I also just cut one out and ironed it directly on the dress:
I am still anxiously awaiting labels from ME Dezines, and I'm going to pick up some satin ribbon in the next few days. But this was great for what I'm doing right now.