My favourite men's hat that I've ever knit is "Botanic" by Stephen West. It was a very fun knit, and a super cool end result. It's reversible with one side being funkier and the other more subtle. I made one for my dh (he wears it on the "funky" side), and am going to knit one for my dad for Xmas (with the thought that he'll go for the "subtle" side).
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As for yarn... hmmm... if he's going to be wearing it all the time (inside and outside) you might want to make it with something that's not too too hot... maybe avoid alpaca for ex. If he's not worried about taking the hat off inside but needs extra warmth outside then I'd go with the warmest option. Besides that I'd just go to your local yarn shop and feel the various yarns to make sure that you find something super duper soft and completely non-itchy.
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Wishing your BIL well. 
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Found a link to the hat! http://westknits.blogspot.com/2009/07/botanic-hat-pattern-now-available.html