I make these with silk I dye myself, and I just cut the silk four inches larger than the flannel (ie. 44" silk, 40" flannel) then I press a 1/2" hem all around the silk, then I pin it around the blanket edge like a binding (or as someone else said- a frame)
I miter the corners (check a quilit book out of the library if you've never done it) and hold them in place with a pin. Then I just sew around the entire edge 1/16"-1/8" in from the hemmed silk edge.
I use a schmetz microtex needle, which glides through the silk, and cotton or rayon thread.
My dd loves hers.... for great prices on the china silk trywww.dharmatrading.com
(white only- to dye yourself- it's fun and really easy)
or I think www.thaisilk.com
has dyed silk at reasonable prices.
100% cotton interlock makes a good flannel substitute, but it's a little trickier if you are a begginning sewer.
I make anything/everything waldorf toy related- any other questions welcome! email@example.com
Hope that helps,