Can you use machine embroidery designs on these?

I wouldn't. This product is made out of some kind of plastic. I will not buy again.

Can this be used for the ultra punch needle embroidery?

No. Don’t think so. Holes are too little.

What cloth do I use to stitch my embroidery ?

It depends what you are embroidering, but this is a good cloth to use. I copied this from a Google search: Tightly woven even-weave fabrics are best for surface embroidery, while loosely woven fabrics are ideal for counted thread, pulled thread, and drawn thread techniques. The fiber content for evenweave fabric can be cotton, linen, rayon and polyester blends—or even hemp or bamboo. Evenweave fabrics are available in a wide range of colors, and the thread counts range from a fine, 32-count linen to a more rustic 18-count. Aida cloth is popular with cross stitchers due to its easy-to-count square pattern, but it can also be used for counted thread, Assisi embroidery or surface embroidery techniques. This cloth is woven with grouped fibers forming easy-to-follow squares in the fabric. With cross stitch, one stitch is worked over each square. Aida is available in a wide range of solid colors, as well as background printed, patterned, or textured varieties. Fiber content can be cotton, linen, or rayon and it ranges in size from 11-count to 22-count (the count being the number of squares per inch of fabric). Herta cloth, a fabric with a large scale count of 6 squares per inch, is technically an Aida and is perfect for beginning stitchers because it is very easy to count. Hardanger fabric is a 100 percent cotton 22-count evenweave fabric. It originated in Norway and is woven with a double thread. Each double-thread group is counted as one. Hardanger can be used for hardanger embroidery, blackwork, cutwork, and counted thread techniques. When using hardanger fabric for cross stitch, it is worked over 2 thread groups, resulting in a count of 11 squares per inch. It is available in a limited selection of colors. Oslo fabric is similar to hardanger fabric and can be used in the same manner. A wide range of ready-made and by-the-yard toweling is available for embroidery and can be used to embroider both contemporary and retro projects. Various ready-made items are also perfect for embroidery—especially surface embroidery techniques. Customize decor with embroidered sheets, pillowcases, and blankets. Or, dress up the dining room with embroidered napkins, placemats, and table runners embroidered to match your favorite dinnerware. Personalize a shirt or apron with a monogram or embroidered motif, and any bride or new mother would appreciate a gift from you embroidered especially for the event. You can even embroider on lampshades or on paper! The possibilities for embroidery on ready-made items is endless.