Christopher-I can understand your frustration. I have taught computer software to adults for several years and one problem is always at the top of the list, manuals!
I do not have access to PE Design. But, somethings remain the same, manuals are often written by someone who is a 'techie' rather than someone who is an embroiderer. There is a difficult line to cross here, there needs to be someone who understands computers and embroiderery too.
I recommend that you go back to the manual (I know, that is not what you wanted to hear) and start in the section that discusses applique. Take that section line by line, being careful not to read ahead, and work with your manual and your computer. This 'inch by inch' process is important because you need to be sure you are not misreading something. It is really easy to read something incorrectly, so think of this as your magnifying glass on this process.
Do not proceed until you understand and have the same process as the photos, hopefully there are photos. If it does not seem to look right to you, try to remember that everyone has a different method of getting to the same result.
Don't work exclusively on this project. Leave it alone and come back to it. The important thing is to come back to it. Sometimes success comes slowly.
Read the forums and blogs here at AnnTheGran, you will learn tricks and tips that will help you in many areas.
Pat, The Avid Embroiderer
If you are interested in selling your projects, you can determine your costs and profits quickly with my Spreadsheet.
If you want a lot of great information on working easier, faster and more confidently on your computer, check out my Tips and Tricks.
If you want to see my pashminas (that I successfully sell retail) check them out here. I also wholesale them.