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I've tried different vector software, and so far, I've found that Inkscape produces the cleanest results, truer to the raster image than other vector engines. The only other software that I found to be better is Vector Magic, but Vector Magic is not free, but it can do colors. You can give this a try since you're getting into embroidery: https://inkstitch.org/

We do not know what you are calling "proper" position for blade depth. But do not use a credit card or post it notes to set blade depth. That is too much blade exposed out of the blade holder.( Too many incorrect instructions out there). If you are seeing the blade tip out of the blade holder, then you have too much blade exposed out of the blade holder. Your cuts look like that is what is going on. Too much blade exposed out of the blade holder. Try this. It works for correct blade depth. Posted hundreds of times on this forum. Make sure no vinyl is stuck in blade holder, blade spins freely and you can add a drop or 2 of light oil in the blade holder. 3-1 oil, sewing machine oil. etc. To start with, you should set your blade depth correctly, by taking the blade holder out of the machine, and firmly cut across a piece of scrap vinyl, you will be cutting. You should only be cutting the vinyl and barely a mark on wax paper backing, Adjust blade to get there, Then put the blade holder back in machine, and use the force of the machine to get there, same results, only cutting the vinyl and barely a mark in wax paper backing. You should barely see and feel the blade tip out of the blade holder. Regular sign vinyl is only 2-3 mil thick. You only cut with the very tip of the blade. When you think the blade is so far in the blade holder, that you think it would not even cut, that is probably correct. The correct combo is less blade more force.