My jacket is finally finished. Hooray! I tried first to inset the lining by machine, but I had a hard time keeping the curved edges on the bottom aligned and the misalignment caused the bottom hem to flare out in the back. So after putting it away in frustration for a couple weeks, I took out the seam and re-sewed it by hand. I was pretty pleased with the result and it didn't take as long as I thought. Because of the texture of the fabric my stitches are pretty invisible. Here's a shot of the inside:
Overall I am really pleased with the jacket. It is comfortable to wear, goes with most things, and adds a nice layer of warmth. The flannel interlining didn't add too much bulk and makes it quite a bit warmer. There are a couple more pictures of the finished jacket here.