Crystalline domains embedded in fluid membrane vesicles are studied by Monte Carlo simulations of dynamically triangulated surfaces and by scaling arguments. A budding transition from a caplike state to a budded shape is observed for increasing spontaneous curvature C0 of the crystalline domain as well as increasing line tension lambda. The location of the budding transition is determined as a function of C0, lambda, and the radius R(A) of the crystalline domain. In contrast to previous theoretical predictions, it is found that budding occurs at a value of the spontaneous curvature C0, that is always a decreasing function of the domain size R(A). Several characteristic scaling regimes are predicted. The distribution of five- and sevenfold disclinations as the budding transition is approached is determined, and the dynamics of the generation of defects is studied.