I found this book, but I don't see a hat that looks like I think yours does.
I'm imaging it to look something like this hat, w/out the ribbing - but this basic shape from the neck up the back, over the head.
I think you're folding the cast off edge back about an inch or so (however long 5 rows is), and tacking the sides to each other. The cast on edge being the back of the neck and the cast off edge being folded back about an inch. The neck edge is then gathered enough to fit around the back of the baby's neck, say back of ear to ear. This section should be short/long enough to pick up the 42 stitches and the cast on 14 will create the strap that fits under the baby's chin. Knit 1 row and then cast off. Is there instruction to put a button and loop or snap at the end of the 14 stitch extentions so it can hook to the toher side of the hat?
Does any of this make sense?