Thanks! I do render the kits in Blender (and I also add a bit of displacement to the crest there), but the embroidery effect itself is done using an embroidery software called DRAWings 4. All you have to do is loading a vector image (SVG format) and the software itself does the embroidery. Then you can export it in PNG and use it in your kits (I recommend using an editing software - like photoshop or gimp - to put the original crest in a layer below the embroidery crest, as sometimes the embroidery leave some empty spaces, but that's all there's to it).

You can download a demo for the DRAWings software here. It has many limitations, but for creating kits, it works as a charm, since they allow you to create the embroidery and export it as a PNG (since it's a software dedicated to real-life embroidery, most of its limitations are related to the process of embroidering itself, which we don't use).

Let me know if you need any help! :)

Here's the actual image of the Oakland Roots crest I used for the kit: