Last year I designed a cupcake applique embroidery design, and used luscious light pink Minkee fabric for the frosting portion of the design. It looked great on dishtowels. It was a fun design to use on baby bibs as well.
Another design that is great for Valentine gifts is this "Sweetie Pie" design by Sonia Showalter.
I haven't designed or purchased my 2009 Valentine towel design, but will have to do so fairly quickly! This year I did purchase some Kohl's dishtowels, and embroidered names on them. Actually, the Kohl's towels were quite pretty, and this was a quick option for a pretty gift. Normally I only embroider on my microfiber dishtowels, but couldn't pass up the Kohl's towels because of their sale price and how cute they were. Here is one style I used.