I have been researching the lozenge printing idea for a future project (Siemens Schukert D-III in 1/6th scale). Earlier I designed and kitted a Fokker E.V (D.VIII) in 1/8th scale and had success using a Canon laserjet printer on light bond paper. This was for an electric model and quite small and the process wouldn't work on a larger, glow powered subject.
For the Siemans Schukert I am looking at places that do dye-sub printing on fabric for signs and banners. This is a beautiful process and the colors are amazing. I do not know about fading although many of these products are used outside. I think they will fade (anything will) but how much is yet to be determined.
One of the places sent me samples of the printing on various fabrics. Most of these places won't print on supplied fabric, just their own. The one (DPI, San Francisco) indicated they would at least try a sample if I sent it in. The dye-sub process involves high heat to set the colors so printing on iron-on fabrics would not work.
With the samples of fabric sent to me, their "poplin" fabric is good for opacity and great color. Its weight is about 4 oz per yard which is okay. The color is not affected by iron heat so could be ironed on, using balsarite or balsaloc as adhesive (applied to the framing). The fabric does not seem to shrink with even high heat so getting rid of wrinkles is a big issue. I may try doping it to see if that shrinks it.
Another step is to send them some SIG Koverite (no adhesive) and see if they can print on that. It can be heat shrinked at least.
The SS D.III had a strange and complicated way of applying the fabric. The top wing had the fabric applied at a 45 degree angle to the leading edge but the bottom wing ran parallel to the leading edge. This makes it hard to use the GT fabric or the AZ Modelcrafters fabric so I would make my own CYMK files and send them out.