The T-shirts are heat pressed with the heat set vinyl as you described - for 2 color just press the first color about 5 sec peel and apply the second color then press the whole time. I have heard of people using heat press vinyl on bugs but for longevity what you have been reading about is sublimation ink set up. the ink actually goes to a gas and attaches itself to the pores in the special coating on ceramic mugs and can be scrubbed and run thru the dishwasher without a problem. have you searched vinyl mugs above?
http://forum.uscutter.com/index.php/topic,2517.0.htmlyes, that was the thread i saw when i was referring to spending $800 on the printer to get started, like i said, hobby, not business, so that kind of cost is prohibitive for me to get into it.
and i saw about using the teflon sheet, im guessing that considered a "consumable" but it is more or less almost infinitely reusable?? (assuming i dont rip/burn/whatever it)