I forgot to mention I have a brother pe 500. any advise will be very helpful.

Are they knit T-shirts? If so, you will do a more professional job if you use iron on stabilizer. This keeps the knit from stretching. If not knit, I'm not understanding "holes around the thread"
Re thread breaking..if it is not old thread, I think you might get better results by putting some distance between the spool and the threading path. I wonder if it is getting wound round the thread holder? I heard a cute solution the other day where the embroiderer ran her thread thru a hook in the ceiling (where a hanging plant had been--just because it was there. Other than these possibilities, I can only surmise a burr on the bobbin case, or on the needle plate to cause the thread to fray & break. To be sure the prob is not in your tension disks, work a piece of dental floss back & forth thru the thread path. Hope you find your answer--those machines can sure cause a lot of frustration, BUT a lot of enjoyment too.

sorry--I posted twice!

This post was edited by dancingirl on Sat, Jun 1, 13 at 17:05