I'm glad someone posted this topic. I'm having the same problem.
Last night I was trying to make a bag with 2 way stretch knit, and even when I was using a zig zag stitch, it was still wavy on the sides. Besides, I'm worried that a zig zag stitch won't be strong enough.
I ended up using bias tape and a strait stitch, but that looks crappy (even though it's inside the bag and you can't really see it). I want to make a couple more things out of the fabric I have left, but I haven't found a good way to do it.
I have a serger, but I'm evidently too stupid to use it. It still makes it wavy, even when I lengthen the stitch. I'm scared to mess with the tension, because I don't really understand how it works. Should the tension be set looser, or tighter, and on all the threads, or just some of them? I've read the book that came with my serger, but I can't get it to do the things that it says it's supposed to do (except gather -- I managed to get it to do that).