First of all ... take a deep breath ... it's supposed to turn into stockinette stitch at this stage. When you did the base, you were knitting back and forth, which creates garter stitch when you knit every row. However, now that you've picked up all those stitches & joined, you're going to be knitting every row (round) again, and since you never turn your work, all the knit stitches are going to end up on the outside & the purls will all be on the inside.
Just keep going, and before you know it, you'll have your Booga bag!!! Oh, and if you're having trouble joining, you may want to take a look at Amy's circular knitting videos. Good luck!!!