Most of the bottlecap badges I've seen seal their image with a thin layer of resin. It makes for a very nice effect and you can embed other items over your image, but it does take longer to dry and involves fumes even more noxious than those of Mod Podge. I like it this way--it's faster and the image will still stay in there. If you want to try the resin technique, there's a great tutorial here
The Mod Podge will dry clear and relatively flat, but if you use a stiff brush and a good glob of sealer, you can get a cool brushstroke effect. The other nice thing about using Mod Podge instead of resin is that you can move on to the next step while it's still drying.