Thanks for typing out the pattern. There's a few things that don't make sense about it.... For instance, if 4 rows are 1¼" by the gauge, and you knit 4 rows for the bottom which is supposed to be 2" wide after felting, and felting shrinks it...???? How does that happen? I think 4 rows is a typo.
I'd knit at least 8 rows for the bottom, pick up 8 along the edges and carry on with the rest of it. I don't felt, but it sure doesn't seem like those 4 rows are going to be 2" after felting.
ETA: I just had a thought... is the bottom supposed to be flat, or does it just grow out like a V ? Like this ---
| | or this | |
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If it looks more the V shape, then yeah, do the 4 rows, picking up 2 for each row.