That's beautiful and it looks perfect to me.
I saw a tut on inlay somewhere that recommended using the leather piece removed for the inlay to be trimmed slightly around the edges, then replaced behind the inlaid material (leather or in your case, denim) in order to pad it out to bring it to the same level as the rest of the piece. On the other hand, the inlay in your work is framed by the leather and that also works extremely well. What a neat piece.