I posted this originally elsewhere, so am just going to link you in and add some more notes. Well, I have to go out soon. So hop on over to old blog to read up on the method using stockinette or garter stitch flat.
Other stitch patterns:
Don’t try fancy stitches when knitting something that you intend to felt, as stitch definition tends to get a bit lost unless you only intend to shrink partway (as I did in the pics). Fringes are also best added afterwards, unless you’re after a weird dreadlock effect. Ribbing also tends not to shrink evenly, so you end up with a bumpy effect. Again, you might like this, but I’m pointing it out in case that’s not what you’re after.
So the other stitch patterns that will work well for this design are circular, so you cast on 1 stitch less and only have to stitch the bottom together. And unless you’re using a lot more stitches or massively thick yarn, you’ll need to use dpns or magic loop.
Stockinette: After joining, knit every row
Reverse stockinette: After joining, purl every row
Stockinette stripes: Purl 5 rows, then repeat knit 4 purl 4 rows until 5 before end, then purl 5 again.