HELP ME!!!! ADVICE WANTED!

I need advice for this 11" x 11" piece of quilting to be attached to a quilted background. My problem: I attached the photo transfer image of my Grandmother to a lace handkerchief and a piece of wool felt. When I did the Kantha stitch on the surrounding hankie, the wool felt puckered and made the image buckle. If it weren't for the bead border, I would just make a new image that would fit the space. I don't want to do that, so if anyone has any suggestions for how to remedy this problem, I would be eternally grateful.