Cut the yarn after step 1. I'm still not 100% sure on step 2. If it ends with the bind off on a knit side I think you will be in the right place to continue without cutting the yarn. You'd just start picking up stitches right there, heading down to your 4 stitches on the safety pin. You'd pick up 8 stitches along that side knit the 4 off of the safety pin (put them on a needle to make it easier), then pick up the other 8 up the other side of the heel. But if the BO row is on a purl side you would need to break the yarn.
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Also, I think I'm not counting the stitches correctly when I'm picking them back up (like you would do on a sock - I've only had one sock lesson).
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Are you talking about the 8 stitches you pick up on each side of the heel? You just count each loop you pull up onto the right hand needle until you have 8. If you mean you are not absolutely sure where to put the needle to pull up the 8 stitches, I'd say there is probably an optimum way to do it, but if you don't get it perfect it will still work. Sometimes on things like this I pick up more than it says and then on the next row knit a couple together at the needle changes to get rid of them. Keep track of what you do and do the same thing on the other leg if you can. When you are all done if there are gaps or anything a stitch or two carefully placed with a tapestry needle will close them. Don't worry about it too much. There are no exact rules, just try to get it to turn out looking as good as you can, whatever it takes to accomplish it.