I looked around for other patterns and found this one: http://www.goldenbirdknits.com/2009/02/
Sock yarn, or superfine weight yarn of your choice. Think small.
Size US 3 double-pointed needles for bag, Size 3 crochet hook for handle.
Scrap yarn, smooth chopstick and yarn needle for making tiny skeins.
Two round toothpicks and small beads for making needles (the colored ones are awesome for this).
I stole this part from http://aly-oops.blogspot.com/2008/03/
Step 1: Cast on one stitch onto a Double Pointed Needle.
Step 2: K1, P1, K1 in the same stitch.
Step 3: Turn the needle and Purl across the row
Step 4: Turn the needle again, Kfb all stitches.
Step 5: Turn the needle and Purl across the row.
Step 6: Turn the needle, Kfb all stitches.
Divide these stitches onto three double pointed needles. Knit all stitches, joining the round.
Step 7: [Kfb, K1] around.
Step 8: K around.
Step 9: Repeat 7 and 8.
Step 10: [Kfb, K2] around.
Step 11: K around. [I stopped here, but you can choose to make a bigger basket by continuing on from here]
Repeat this process, increasing by one K stitch per set.
Ex) Next round: *Kfb, K3* Repeat
-*Kfb, K4.* Repeat
[End of pattern theivery] Here's where I started improvising:
Next round: Purl all the way around (this will give the walls of your basket a definite change of direction from the flat, going 90 degrees up from the bottom circle)
Knit 12 or so rounds. Seed stitch will give your basket more structure, but it takes me forever to do seed stitch, so I just knitted every round. Bind off except for the last three stitches. I changed to a size 3 crochet hook at this point and crocheted a three-stitch single crochet handle until it was about 2 1/2 inches long and attached it to the three stitches directly opposite on the brim, sewing it on with the tail of the yarn. This helps keep the brim from rolling down entirely. Depending on your skills, the bottom of your basket may have a small hole in it. You can thread the tail of yarn through the stitches and draw them tightly together, just like making a magic circle in crochet.
Make tiny skeins of yarn by wrapping around a smooth chopstick (I used one enameled one as a nostepinne), or just make yarn balls. You can use a yarn needle to pull a long end through the center of your mini skeins to keep them from unravelling.. Don't bother with trying to make them too much like a traditional skein of yarn. Make them look more like the Lion Brand ones that are roundish and fatter than the traditional Red Heart ones that are longer and thinner.
Make the knitting needles by gluing beads to the ends of round toothpicks. It's ok if the pointy end of the pick sticks out of the bead, because you can nip the points off with nail clippers. I used a Sharpie marker to color in the bare wood where I'd nipped off the points. I also rubbed the toothpicks on a candle to wax them a bit so they'd slide into the mini-skeins more easily [or because there totally is a hyphen in anal-retentive, I've not entirely made up my mind yet].
Pictures to follow, eventually.