Sewing Varsity Letters onto sweaters

Zig Zag stitch is the one I have always used.

Zig Zag is commonly used on twill letters. The image you posted is a simple running stitch, it's just a very small spacing.

If you are doing this on an embroidery machine, your biggest issue will be getting the applique and the stitch file correctly aligned. What type of machine are you using?

Thats the back of the letter. I scanned the actual letter in so that I could digitize the sew down. That running stich is for the white inset on the front of the letter. I digitized a running stitch a little bit inside this for the placement, then digitized another stitch about 1/4 inch inside of that. That stitch would actually sewn the letter onto the sweater. I made that a triple run stitch. I thought using a zig zag stitch would get a little crazy with all of the inside corners, etc.
I have a Barudan machine.

No problem doing a zig zag on that shape of letter.

Zig Zag. We use TwillStitchPro from Imprintables for this. Your bigger problem is the sweater. For those I would use a fusable backing to stabilize the sweater and then sew it down. Otherwise you may have it floating all over.

Your other option is a serger if you have one.