Personally, I would STID around the blocks, and meander the border. If you don't want it puffy use the thinner batting. It shouldn't be bulky if you do it like that. You want it soft and cuddly but not puffy. I also personally would use the higher loft batting, just because I think it is softer and not as flat. By STID around each block, it will keep the batting in place, and accentuate the blocks. That is just what I would do for my own grand children. She is going to love it no matter what you do.