5,6,7 are the normal SPI for most but not all things.
The leather sounds like garbage but a picture would help. It should not flake off or turn the cloth brown.
Needles are normally blunt. Try not to get the ones with the large eyes from Tandy. If you can find them start with a #0 Harness needle. Thats a good size to start with. You may later go to a #1 or #2. Larger number smaller needle diameter.
The punches do not work as well for most people but some people love them. A diamond all is a good/better way to go if you want to learn the old ways. Some people, not me, will drill the holes out.
It sounds like you got the wrong stuff.