I used dk weight yarn and cast on 140 stitches, and just knit in the round all the way until I felt it was long enough for a little baby. I kind of wish I had cast on more--maybe 160, which I think I'd do for a larger baby. It can really be as large as you want.
I was going to do provisional cast on for the bottom, but didn't have anything with me to do it, so I just cast on as normal and then picked up the stitches and did the 3 needle bind off on the picked-up stitches.
When the body was as long as I wanted, (about 16 inches) I left the front half of the stitches on a needle and just worked back and forth on the back stitches for about 8 inches and then did 3 needle bind off of the two halves and that made the hood.
Then I picked up stitches all around the edge and knit in garter for a few rows with a smaller needle to keep it from rolling down. It still wants to flip some, but it's no big deal.
It really was rather simple.