folksy is the UK equivalent of etsy, though I have bought off both. I have also bought of notonthehighstreet too.
A blog is a good tool to support your eselling, as you talk about what you make etc, sometimes offering discounts or prize draws can tempt people in.
I think small scale you don't need to have additional insurance, just make sure your contents cover is enough for your stash and machine should the worst happen.
It may be worth making up a few more samples and talking to your friends, co-workers and playgroup/babygroup as well, the more input the better. Some people want to pay a pittance for things that are beautifully hand crafted and don't realise the time put into something like that.
It's also worth looking at how long it takes to make one item from scratch, how long it would take to make 4 & 8 items at the same time, you may find that a little bit of time saved can help your item costs as well. I like to break things into steps so that I can do all of that bit and then start the next step. It's sometimes something simple that can save you alot of time. MiL is a big fan of chain stitching, as in lining things up to go through the machine in a chain, then snips apart to assemble.