How can I stop knit fabrics from getting needle damage or holes in fabric?

How can I reduce the hem rolling (tunnelling)?

Increasing the amount of thread in a seam will improve its appearance; this can be done by loosening the tension on the looper and needle by using a sewing machine that adds additional thread for the looper. Sewing with both needles on two plys of fabric will also improve appearance.

How can I reduce impression marks that show through from the overlock stitching when ironing side seams / inseams?

The use of a fine Gral thread or a texturised polyester thread will improve appearance.