Yes, I agree that the pattern wants you to pick up the side stitiches of the flap (as stated in the second part), but there is no way the flap in the picture is made of original 41 stitches. Here is the portion in question: Earflap
CO 41 sts with CC on #8/5mm needles [either use straights or circular needle knitting back and forth].
Row 1: k with CC, break off CC.
Join color MC.
Row 2: k 18, ssk, k1tbl, k2tog, k18.
Row 3: k 17, ssk, k1tbl, k2tog, k17.
Row 4: k 16, ssk, k1tbl, k2tog, k16.
Continue in this manner, working one less stitch on either side of double decrease and knitting the center stitch through the back loop until 3 sts remain.
Make second ear flap the same.
I also don't see in the CC that is in rows 1-2, unless it has something to do with knitting the edge of the earflap and the front brim edge first and then going on from there? Maybe this pattern is too intermediate for me...
Thanks for the help,