Took me awhile but I figured out how to emboss tooling leather, and have yet to attempt to cut it. This was the big selling point for me on this machine and was having rotten luck with it until today. I thought this may help others who also have the same issue. I use craft-store tooling leather - the kind that comes in a 8X11 sheet (approximation) and is about 2-3mm thick. I typically find these at craft stores like Michael's, Hobby Lobby, and even Joann for about $10-$14. The thickness of it is key, because as we all know the roller area of the machine only has so much space.
Prepping the leather:
After you have made your design in MTC and are ready to emboss, you should have a spray bottle of water ready to saturate the leather piece you will be working on. This is key because if you try to emboss over it without "getting it ready" first the leather will retain very little of the emboss. Saturating it with water preps the surface. I spray the whole surface 2 or 3 times while waiting in between for it to soak in (it doesn't take long). If after drying the leather becomes cracked-looking than it's possible you over-saturated it, and became distorted in the drying process.
Here's the interesting part - before I couldn't figure out how to insert the leather piece. It has to be in between the gray prongs that help move the mat around, and also the two soft plastic rings that guide it have to be moved as far to the edge as possible or else those will also leave an impression in the leather. You can see in the photo the long vertical line - that was made by the teeny rollers. Slide them to the side.
I used the KNK embossing tool (with the smaller embosser) and the settings are as follows: Speed 12, Force 160, multicut 4, 0 offset, and I let the tip of the embosser attachment rest directly on the leather as I was tightening it.
To finish off your leather piece you can do a number of things, like dyeing it, staining it, or doing any additional hand-tooling. Just make sure the leather has dried first. Tandy Leather has a lot of video tutorials on Youtube for just about any project. I would also suggest using a gloss coat to make it shiny. Everyone likes shiny. To ensure the leather is well taken care of and has a nice life you may want to condition it with some leather conditioner.
Hoped this helped someone, let me know if you have any questions! I may in the future even make a little video tutorial, I had so much fun watching the embosser go!