word from the pro...
the idea of a small patch zig zagged on is how I do it, and I've been a technical sewing specialist for 10+ years. If you use a med zigzag, you don't need to turn the hem. I go for a round shape as it handles the distortion of lycra better than a square.
You haven't seen a grown man cry until he rips a hole in his $250 Assos bibs....
Malkin is right, lycra doesn't fray but it will unravel and the holes will grow after a period of time.
If you want to buy lycra for mending, Jo ann's usually has some but you can order better quality online, Seattle Fabrics has a very nice selection of Italian lcyra.
www.specialtyoutdoors.com/about/whatis.asp if you are curious.
Irulan