Making Small Blocks Smaller

I spent last night playing around with little Christmas ornaments. When I did the tutorial for the Dutchman's Puzzle ornament a couple of years back, I sewed binding around the edges. It added a lot of bulk and I was never really happy with the results. This time, I trimmed the edges and zig-zagged around the whole thing, which I like a lot better.

The block would finish at 2" square, but because there's no place for the seam allowances to go it winds up being 2 1/2"  The  churn dash is 3 1/2" I'm leaving the seam allowances because they give it a nice border effect, but I'd like to get the block a bit smaller without making myself completely insane in the process.  That's when the math starts to get scary, when the seam allowances take up more space than the actual block pieces.