Use the same yarn you made the item with. I've sewn on buttons using a split length of the sweater yarn; cut a length of it and unply it so 4 strands become 2.
Where the pattern says " Pick up and knit 2 sts under thumb." it means you actually have to make sts there. In the place where you CO 1 st, insert the R needle as if to knit a stitch and wrap the yarn around and draw through. That's pick up and knit 1, do it again, or do a m1 between sts and there's your 2 sts. The next row you knit those 2 tog, that will help close up the gap between the thumb and hand.
"What does "S" mean (ex. K1. S11. K1. S11...)?"
That's actually SL 1, not S 11. On some fonts the lowercase L looks like a 1. So that's really k1, sl 1, k1 sl 1. To slip a stitch, just move it to the other needle. And it's really "Sl1. K1. psso." which is a dec - skp or ssk, and there's a video on the decreases page. Psso means 'pass slipped stitch over', over the k1 st.
You can make the loop with your fingers, here's a page that shows how to do a crocheted chain, just use a finger instead of a hook.
sue- knitting heretic