I use Madeira embroidery thread on top and those prewound spools of white on the bottom. My quilt shop offers an 18 spool starter kit of Madeira thread for $25 which is a pretty good deal. I've seen them online for a similar price.
That's a sweet little pouch and fairy. I picked up my adorable tiny house at the post office this morning. The best part? It's a replica of our home! My husband recognized it as our house the minute he saw it. I'm curious about the construction process, zephyr, you did a great job! It's nice and sturdy.