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This was with some cool thick-and-thin wool/cashmere blend yarn I picked up at Sheep's Clothing on sale. I would have been hesitant to felt a thick and thin, or something with 10% cashmere, but they had a felted sample at the shop, and it was gorgeous. I bought about 10 skeins of this, and decided to make whatever bag would come out of it. I knit a garter stitch rectangle for the bottom, then picked up stitches all around it and knit in the round till I ran out of yarn. The strap is one of those double I-cord things that come on so many felted bags. I couldn't decided how I wanted to attach it, but I think poking it through and tying a knot worked out pretty well. I wanted it to stay securetly shut, but I didn't want to fold in the edges and lose a lot of volume that way. Unfortunatley, I think this yarn has been discontinued by the manufacturor, or I would highly recommend a bag out of this for yourself. It's still super soft when felted.
In summary:
Pattern: Made it up as I went along
Yarn: Queensland Collection Big Wave (90% wool, 10% cashmere), thick and thin, 55 yds, 10 skeins
Needles: I've forgotten already, but fairly large
Time: Maybe two weeks of light work
Cost: About $80, even on sale. But I enjoyed knitting it, and I enjoy using it to tote around the knitting, so it's worth it.