Im trying to embroider on a knit t shirt.  I tried medium stabilizer underneath the shirt with wash away on top and it still bunched and separated.  What can I do?

Is the design heavy or detailed? Make sure you are using a ballpoint needle. The ballpoint needle has a small round ball on the end of it and is designed to penetrate between the fibers of the knit eliminating the chance of the cuts unless it is a dull needle. If it is dull, it will definitely cut the fabric and cause runs and holes. On knits, the smaller the needle point, the better your design will look when it is finished. The ballpoint needles come with light, medium and heavy points. The light ballpoints (SES) would be used for lightweight fine knits and sheer woven fabrics, such as silk.

also you will need a light spray of adhesive to help keep your fabric in place. Perhaps digitize your stitch length  increased a bit, like 30%

I have also found that using a heavy cut away stabilizer also really improved my stitching on knits.  Either iron on or non iron on attached with adhesive spray or double sided seam tape. I am still a newbie but knits are my favorite.