It does seem that you'll have 38sts on the needle for magic loop, distributed as the instructions say. You'll have leg #2 near the tips of the needle, 10sts on the front tip and 10 on the back. Pull out the tip of the back needle and use it as the right workng needle. Slip a marker onto this right needle, start with a new end of yarn and knit the stitches off the left needle. You'll be starting halfway through leg 2.
If you haven't tried magic loop before, here's a good video