Marc @ MAKE writes:

Lynne Bruning has a nice instructable about using machine embroidery to cover conductive thread. I kind of like the look of the silvery thread, but you might feel differently and want to cover it up.

More:

New Soft Circuit Kits in the Maker Shed and Massive Soft Electronics Roundup

In the Maker Shed:
Makershedsmall
9780596514372-2T
Fashioning Technology