I have just knitted your pattern, to see what the problem was, but it works out fine. Trust the pattern!!
You are increasing one stitch on every row, and it makes a "lacy" border.
It works like this :
Cast on 1 stitch
Row 1 : Knit into front and back of that 1 stitch (which makes an extra stitch) = 2 stitches
Row 2 : Knit into front and back of first stitch (which makes an extra stitch) = 3 stitches
So, Row 6 : Knit into front and back of first stich (which makes an extra stitch) then knit all other stitches (you should have 5 stitches to knit after the first one (which is now 2). So therefore you have 7 stitches.
Row 7 : Knit 3, put yarn in front of work (as if you are going to purl), Knit next stitch and all rest of stitches. (The loose wool = one stitch when you knit back on the next row)
I hope this helps and has not confused you even more. Please pm me if you need more help!! We were all new at some time!! And by the way, the pattern looks lovely, what are you making?