Since it is such a simple design, go for a yarn with a great color or texture that you want to show off. The wallaby looks like a sweater I would wear all the time, so I would probably do one in a machine washable/dryable yarn. How about Cotton-Ease or Brown Sheep Cotton Fleece?
Ariann Cardigan in Brown Sheep Cotton Fleece - 11 inches and two buttonholes done!
Tomato from No Sheep for You in Cotton Ease - nearly done! One sleeve left.
Tuscany from NSFY in Elsebeth Lavold Silky Wool - it's working up beautifully.
Montego Bay Scarf from Summer 07 IK Knits in Sea Silk - an indulgent knit