Handwash, cool water, using either wool wash (i.e. Eucalan) or baby shampoo.
Basically let the sweater soak, then VERY gently squeeze the wash water through it (VERY gently - aggitation causes shrinkage).
Lay it on a towel and wrap it up - then walk on it to get the excess water out of it, and lay it flat to dry.
Careful with wanting shrinkage.. Wool shrinks funny.. Not uniformally like cotton.. You can check out the diapering forums for wool care.. :LOL all those soaker loving momma will give you a nudge in the right direction with any question.. DId you want to lanolize it and make it water resistant or just clean??