Help with newborn wrap

[stacymarie1216]

Hi everyone!
I'm very new to knitting and haven't ever posted a thread here. I literally picked up the needles two weeks ago and think I have a pretty good handle on casting on, knitting, purl stitch, casting off and I'm working on the magic loop and knitting on circular needles.

One day I found these adorable little newborn wraps:

http://www.etsy.com/view_listing.php...ng_id=18697785

and ever since I have been obsessed with figuring out how to make them! Can anyone give me any tips on starting these? I thought I would start out with an ankle sock pattern and modify it...but I'm having trouble with the magic loop to do a seamless toe-up pattern. When I knit with the magic loop method, I get two sides that are perfectly knit, and then two sides that are so stretched and just look like strands holding the other two sides togehter. I can attach a picture if that doesn't make sense. Wow this post has gone in several directions...if anyone can help me out with anything I'd love it!!!
Stacy