It may not fit. Cap sleeves are generally sewn on the top half with a running stitch, gathered to fit, and then sewn into the opening. Skip ahead to the finishing directions and see if this is what they want you to do. I've never knit cap sleeves before, but I have sewn them on a sewing machine. That's how they are constructed with fabric.
http://sewmamasew.com/blog2/2008/05/...set-in-sleeve/
http://www.youtube.com/watch?v=orMVu4B8GsU