I just put each girl in a onesie and cardigan and then tied a piece of pink gingham fabric around their head for a headband. A lot of pictures show a scarf around the neck also but I was too paranoid to tie anything around a 7 month old and 2 year old's neck.
Once you have your square, use the calculations done for you at Dana Made It to determine how to cut out the center of your skirt. The calculation is the waist measurement plus 2 divided by 6.28 (for my oldest her waist is 17 inches so (17+2)/6.28=3.03). Measure from the center corner identified above and then cut in an arch for the waist hole (see red lines in picture below). Once you have the center hole cut, just measure from the cut line the length you want the skirt to be (for me this was 12 inches) and cut along that line to make the outer circle (see blue lines in picture below), the final product should look like a donut.
Once you have your donut, its time to add the elastic. I took each girls waist measurement and stretched 1.5 inch elastic along my measuring tape and cut at the measurement that matched their waist. I didn't pull too much but made sure that it would be tight enough to keep the skirt up. I sewed the elastic together into a loop and tacked down the ends. I lined up the front, back and sides of the elastic with the front, back and sides of the skirt and then pinned it in those 4 places (note that the elastic will be smaller than the skirt opening). To sew the elastic on I started at the back pin and using a zig zag stitch sewed a few stitches. I then found the next pin in line (the side pin) and stretched the elastic until it laid flat along the material. I continued to sew with the elastic stretched until I met the pin and repeated until I got all the way around. Note that the elastic should be sew on top of the felt so that it lays nicely. Once the elastic is on you are done with the sewing. Because felt won't fray and because it is so heavy, I just made sure that the bottom of the skirt was cut nicely and did not sew the bottom. I embellished with a poodle that I bought from my local material store as well as trim for the poodle's leash. I just laid them out on the skirt and attached them with hot glue.
All in all I think I made both skirts within an hour and half or 2 hours, so not bad for a DIY Halloween costume, and they look pretty cute if I do say so myself :).