I've printed a small series of test runs and can report some results. My decals are three color, 2.75 inch circles. On a 8.5 x 11 sheet of adhesive backed, white vinyl stock I'm printing 8 decals per page.
Example of stock I'm using here:
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http://shop.store.yahoo.com/mcgpaper/inpapbumstic.html>
The optimal ink setting for my Epson Stylus Photo 1270 has turned out to be "Photo Paper". Note that standard Epson ink is NOT waterproof. My solution for this problem was to obtain some cold (manual) application laminate sheets. Laying these over my printed sheet of decals has worked nicely. I use a non-abrasive cloth or tissue to "rub in" the laminate over the decal area and the results are very satisfactory.
Now the hard part, cutting the decals. The cutter I obtained does cut nice circles, but the problem for me has been alignment.
Cutter 2nd from top here:
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http://www.cutnfun.com/cutters.htm>
IF you can line up the cutter in the exact middle, cuts should be easy. I have four point reference marks printed with each decal. With those guides, I draw a center cross on the back of the decal page, line up the cutter and cut from the back. Unfortunately, my rejection rate for off center cuts is running between 30 & 50% per 8 decals a page.
Perhaps another cutter would solve this problem, but am not sure what type that might be. A die stamp would seem to be the best choice; however then you are restricted to the die size and they're not exactly cheap.
-Scott