The part about leaving a length of yarn when you BO and 'arriving at the CO sts' to gather them? It sounds like you'll use the tail and thread it through the bound off sts like a drawstring to gather them. If that's the case, it may be easier to leave the sts live, and gather them together. Though later it says to join the CO and BO edges in a circular shape.
You might try contacting the people on ravelry who've done this one and see what they did.
sue- knitting heretic
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I think you're knitting the cup from base to lip. Bind off the sts at the lip leaving a long tail of yarn and use the cut yarn tail to seam the two sides of the cup together. When you get to the base, tie off the yarn and thread it through the cast on sts to gather the sts in. This will make the bowl shape at the base of the cup.