I think 3" will fit. You have 1.5" but there are two foam rubber spacers on each side of the roll and the letter block will take up to 3" so...
Yup... I just checked it and 3" will work. The foam pads come off and there is a 1/2" core.
These should work--> http://www.ebay.com/itm/KINGSLEY-HOWARD-HOT-STAMP-STAMPING-MACHINE-FOIL-3-x-100-3-ROLLS-YOUR-CHOICE-/251155705029?pt=LH_DefaultDomain_0&hash=item3a7a0becc5