Hi Syd,
First of all - I love the colors that you have chosen for your quilt. It is going to be beautiful when it is finished.
Don't worry about the paper falling off the triangles, in fact since it is falling off if would probably be better if you took it all off, since it looks like you did the stay stitching, and then you won't have to worry about it!
The center circle should measure 16.5" when it is finished (i.e. the quilt top has been put together). When you add seam allowances, the center circle (made in month 1) should be 17" diameter, and the hole it is going into should measure 16". I'm not too worried that your hole is 16.25" as you will be able to ease this to fit. If your circle/center is 16 5/8" then I'm thinking that your seam allowances are a little too generous.
Try the 1/8" seam again - after having removed the paper from the triangles. Not sure what else to suggest other than appliqueing it, but if I get a flash of inspiration I will definitely let you know.
Sarah

Hi Sarah, i finally got the centre attatched after 3 days of doing nothing but that , i did end up hand stitching it all in place. Taking all the foundation paper off really helped, I hope that is the worst part over with lol