OK, I've got the answer to my question. Liquid Thread is the product to buy, water it down w/ 40% water and "heat set" is what Grace calls the process to use the glue in her applique. This after a few e mails back and forth with Grace.
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Thanks Alex, for trying to find out about this product. If Grace uses it, there must be somewhere the rest of us can get it too. The thing that makes this product different is it basically fuses one fabric to another, but not with glue. Liquid Thread's description sounds more like a glue.
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I can't view the Arts and Crafts page as its full of flash elements and the iPad doesn't do flash!
But you might find something useful here http://www.beaconadhesives.com/chaven.html