Cool dress! Hm, now I'm intrigued. I wonder... if I were going to inset the fringe, which I think I would do, now that I've seen the dress, is sew it so that the header of the fringe was past the stitching. Then I'd cut the header off entirely and I think you'd have enough stretch between the fringes for there not to be a problem. I would definitely give this technique a test run! I've never actually done it! I think you'd have to use a very small zigzag or an actual stretch stitch so that the fringes wouldn't pull through the stitching.