This hat uses the Ribbon Bow stitch pattern from Barbara Walker's 2nd Treasury. I modified it to knit it in the round. I'll get a picture up as soon as I can.
Baby weight (fingering weight) yarn in 2 colors
3.5mm (size 4 US) double pointed needles (or circs if you prefer)
Gauge: 5.75 stitches per inch in pattern (after the ribbing)
Hat, as written, is for a very small preemie with a head circumference of approximately 7" around.
K - Knit (if there's a number right after, K that many stitches)
P - Purl (if there a number right after, P that many stitches)
K2Tog - Knit 2 together
Kw - Knit one stitch, and wrap the yarn 3 times around the needle (normally you only wrap once). On the NEXT row, knit the stitch and let the extra wraps just fall off the needle. You'll have a very loose knit stitch.
Sf - Slip one as if to purl with the yarn in FRONT
Sb - Slip one as if to purl with the yarn in BACK
With main color, cast on 40 stitches and join, be sure not to twist the cast-on stitches. Use a marker or otherwise mark the beginning of the round.
Do 8 rounds of K3P1 rib (This is not a fold-over brim. If you want a longer brim for a fold-over, do more rounds.)
K one round, do NOT cut main color yarn
++ The next 2 rounds are done with the contrasting color yarn, carry the main color yarn LOOSELY up each round (just at the beginning of the round, it is not carried around, be careful how you do this, you don't want it to show through the stitches)-
Round 1: *K3, Sf, repeat from * around
Round 2: *K, Kw, K, Sf repeat from * around
Do NOT cut contrasting color yarn
The next 6 rounds are done with the main color yarn, carry the contrasting color yarn LOOSELY up each round (just at the beginning of the round, it is not carried around, be careful how you do this, you don't want it to show through the stitches)
Rounds 1, 3, 5 - K *Sb, K3 repeat from * around ending with K2
Rounds 2, 4, 6 - K *Sf, K3 repeat from * around ending with K2
Repeat from ++ three more times for a total of 4 repeats. Cut contrasting color after the last repeat.
Decrease for top of hat using main color -
Round 1 - K2Tog around (20 st remaining)
Round 2 - K2Tog around (10 st remaining)
Round 3 - K2Tog, K3, K2Tog, K3 (8 st remaining)
Cut yarn leaving a long tail. Thread on a tapestry or yarn needle and run the yarn through the remaining 8 stitches and pull tight.
Weave in all ends.
To make the hat bigger, add more stitches (keeping a multiple of 4) and do more repeats. Or use a heavier yarn/larger needles and work pattern as written.