Reminds me of the first hat I made for my son -it was just a *weee* bit large! LOL, but hey he's grown into it! Then again maybe we got used to it
Anyway, it sure is a nice looking hat! I agree, if you can, try felting it a bit. I had to pass a hat down from DS to DD because we accidentally felted it a little, and its perfect for her now.
Good luck-if it can't be felted you could either frog it or donate it-I'm sure there is someone to fit it out there!