She is adorable! I would leave the design as it is, without applique.
Hugs, Lidia
What a darling bear with that really cute scarf with the fringe! I don't know that I'd put fabric in the window. I think any fabric that was a print would add confusion to the stitchout. Maybe a fabric that had snowflakes...but the frame would blend into it. Hmmm...I think it's great just the way you did it!