Gauge problem + yarn probem now

I’m planning to knit some hat like this http://www.artisokka.com/patterns/watermelonhat.html but the yarn I got is much thinner with gauge of 28 sts/4". How should I change the number of sts for the rest of the instruction? Will increasing all the sts proportionally work, like the CO 84 sts --> 147 sts??

+edit+
now I have a problem with my yarn. I didn’t know the yarn I got is a handwash merino so I’m concerned about the felting problem upon washing and wearing. Anything I can do to prevent this?? or will be better to change it into a felted project? :??

If I were you, I’d be a bit more careful about how you change the number of cast on - take a look at this site http://nonaknits.typepad.com/nonaknits/2004/11/multiplier_madn.html It teaches how to convert a pattern to use a different gauge, and especially with a hat it should be very straight forward.

Good luck!

Maybe this would help?