That hat is supposed to be 12 inches around for a preemie baby. You will want a hat about 17 inches at least to be snug but not too small. At 20 stitches makes 4 inches you would want about 85 stitches. You could use that pattern stitch for the ribbing but cast on 84 stitches. Work rows 1-7 as given but do the repeats 21 times instead of 16. Then work for about 4 inches in st st before beginning the decreases.
Crown (this gives you 7 decreases on each decrease round)
Row 1: K12, PM around.
Row 2: K to 2 before marker, K2tog repeat from * to * around.
Row 3: K even (the pattern says to knit 2 rows even between each decrease round, you could, or just k one round or sometimes 1 sometimes 2 to get a desirable shape)
Next rows: repeat row 2 followed by however many even rows you want between the decrease rows. Keep repeating until you have worked to where you have only the results of K2tog all the way around. Cut the yarn and run a tail though the live stitches. Weave in ends.