I haven't done this, but my first thought was to knit a waistband and then insert the elastic--the way you would with a skirt. In this case, though, you'd knit an extra inch or so at the top, fold it over and sew it down.
"Trust the pattern!"
Time flies like an arrow, but fruit flies like a banana.
Hop aboard while we follow the cloud-covered van of knitting harmony, man!! Woooo!! --Hedgehog
IngridKH on Ravelry