Cute capelet! I like the ruffly edge. Beautiful yarn. Are there yarn overs on the lower part, or did largish needles make it lacy looking?
The second half is K2T-yo-K1 all the way round.
Finally, when the lacey 'skirt' is about the length you want the pattern says to inc 1 st in every st all the way around (K1f&b), which doubles the st count. Knit a few more rows or inches, and bind off. For the last 2 rows I increased my needle from a 15 to a 17!
You got closer to your goal of 5 before you burned out than I could have done. Congratulations on 4!
Everytime I look at that lace work at the bottom in that yarn I am reminded of a dress my grandmother crocheted for me when I was a baby. It was a blue/white variegated thread and had the same feel as what you got on this.