I've finally inlayed the rosette. Because bending the bloodwood didn't work so well, I cut strips of it with my dremel circle-cutter setup. I bent these around a disk of walnut (eastern walnut we had on hand) and then cut out the center of the donut.

Gluing the bloodwood pieces to the walnut disk

The channel (about 1/16 of an inch deep maybe a little more)

Using a toolbox, a battery and a cement stepping stone to press the rosette into the slot.

With the Rosette inlayed and soundhole cut (also done with the dremel).
It doesn't matter that the bloodwood doesn't go all the way around at the top because it will be covered by the fretboard. I still need to finish sanding the soundhole and cut the top down to final shape.
So next I'll work on the neck, sides or bracing. But I go back to school tommorow and unfortunately its kindof hard to build a guitar in a dorm.