The pattern sounds kind of like you have a 12-row stripe of A, 14-row stripe of B, and then the rest's done in A -- though of course you can do whatever you want! ^_^
...The 25-stitch thing looks like it's supposed to be done in the same color as the rest of the row -- you're doing a normal row, but placing a marker every 25 stitches, to make it easier to decrease evenly. (Placing markers and then remembering to decrease on either side of the marker is a lot easier than trying to count it out each time.)
And if you run out of tail, or end up with a hat top that's too loose, you can always use more yarn, and just fasten it on either end.