FayeMaloneDesigns - I've thought more about the print to printable fabric option. Yes it would be easier. But I want my labels to last through washings, because they are a reflection of my company. (Not just selling them here on etsy, but in my products in my other store.) I'm glad you shared though - its a great solution for things that don't need to be washed much. Hopefully all this discussion will help people be able to find solutions!
Amievoltaire - I haven't found any reasons yet to counter it. I've looked! The manufacturer for the iron ons I use feels that their product is in the exceptions list.
Mamafamilias - inkjet ink is CMYK and on the exceptions list.
A thought in general on making your own labels. I'd recommend staying away from using an adhesive to keep the edges from fraying. Adhesives are exempt IF they can't be touched by a child. (I.e. in something)
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