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QUOTE: I applied the pad for about 6-8 seconds each.
By 'each' I assume you mean for the AC and the DC cycles. That's not enough. Start with the DC cycle (alligator clip in place) and etch 3 seconds on the steel and 2 seconds off, repeat 5 times for a total of 25 seconds. Remove the alligator clip and repeat the whole process.
There shouldn't be anything to peel off the stencil but those blue stencils can be a little resistant. You might try washing it under running water, gently rubbing the artwork area. When clean you should be able to see bright light through the artwork. If the light looks heavily diffused then the stencil isn't clean or it isn't made well enough and that's unlikely with Ernie's labels ...
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