We have been experimenting with felt engraving. Here are a few of our recent endeavors (additional photos in the comments).
All of the engravings except the middle Piranha Plant in the first photo were done with the following settings 3mm felt:
Lines per inch: 195
Power: 70 (will be switching to 80 for lighter fabric)
The middle Piranha plant is has the same settings for speed and power but here we choose Convert to dots. It did work as well for creating contract between the colors.
We will be increasing the power for cutting next time as it did not quite cut through. We think this is due to the lighter color of this felt. The original test felt in photo 3 was darker.!