It's as Ingrid says, the 4 rows of the pattern stitch are placed in the actual sweater
according to the directions for rows 1 and 2 but as you repeat row 1 and 2, you'll continue with the 4 row pattern stitch. You had the right idea in your question:
"Work even in pat as established until piece measures 2 1/2” from beg, end on RS." Does this mean that I repeat those 2 beginning rows or should I do the 2 rows while also doing the 4 rows of the "Pattern Stitch"?
So it would be
row 1 with row 1 of pattern stitch
row 2 with row 2 of pattern stitch
row 1 with row 3 of pattern stitch
row 2 with row 4 of pattern stitch
Very pretty pattern.