Edited Jan 2011: I added stitch count and hopefully clarified the sleeve/body transition.
Here it is! This sweet little baby cardi is exactly how I envisioned it. I'm disappointed I can't offer a picture of it
on a sweet baby yet, but I'm working on that. I made a few adjustments from the original blue one, barely noticeable, but more structurally sound and appealing. The final pattern is the three button version pictured in orange. It is worked top down seamlessly (because, really, who likes sewing seams?) and uses only 4 basic stitches! If you need, Knitty has a great
stitch index.
In all versions, I used
Berroco Comfort because it's very soft, machine washable and dryable, inexpensive, comes in MANY colors, and one skein is enough. I imagine it would be adorable with ribbon yarn and the pattern would work just fine with any similar weight yarn.
Happy knitting for a little one in your life!

Size 0-3 months
What you'll need:
Approximately 200 yd/190m worsted-heavy worsted yarn
Size 9 (5.5mm) needles, one set of straight or a circular and a set of DPNs or a long circular for magic loop
Stitch markers
Scrap yarn
Yarn needle
Three buttons, one-half to one inch size
Gauge: 17 sts and 24 rows in 4 inches flat stockinette
Neck and Sleeve Shaping:Using straight or circular needle, cast on 44 sts
Rows 1-3: K all sts
Row 4: K9, PM, K6, PM, K14, PM, K6, PM, K9
Row 5 (Right Side): K2, YO, K2tog, *K to 1 st before next marker, YO, K1, Sl M, K1, YO, repeat from * to end [52 sts]
Row 6 (Wrong Side) and all even rows through 24: K4, P to last 4 sts, K4

Rows 7, 9 and 11: *K to one st before marker, YO, K1, Sl M, K1, YO, repeat from * to end [Row 7 - 60 sts, Row 9 - 68 sts, Row 11 - 76 sts]
Row 13: Work as for row 5 (button hole row) [84 sts]
Rows 15, 17 and 19: Work as for rows 7, 9 and 11 [Row 15 - 92 sts, Row 17 - 100 sts, Row 19 - 108 sts]
Row 21: Work as for row 5 [116 sts]
Row 23: K all sts
Row 25: (remove all stitch markers as you get to them) K18, transfer next 24 sts to scrap yarn, K32, transfer next 24 sts to scrap yarn, K18 [68 sts on needles, 24 sts for each sleeve on scrap]
Row 26 (Wrong Side): K all sts, joining under-arms
Body:The rest of the body is worked in a modified feather and fan pattern with edging worked in:
Pattern Row 1 (RS): K all sts
Pattern Row 2 (WS): K4, P to last 4 sts, K4
Pattern Row 3 (RS): K4 *[K2tog] twice, [YO, K1] four times, [K2tog] twice, repeat from * to last 4 sts, K4
Pattern Row 4 (WS): K all sts
Repeat these 4 rows ten times, less for a cropped version, more for a duster.
When desired length is reached, K 2 rows and BO loosely.
Sleeve:Remove 24 sts from scrap yarn and divide evenly over DPNs or longer circular for magic loop.
Begin knitting at underarm.
Sleeve rounds 1-15: K all sts
Rnd 16: P all sts
Work feather and fan in the round (below) three times
Knit one rnd, purl one rnd, BO loosely.
Feather and fan pattern in the round:
Rnds 1 & 2: K all sts
Rnd 3: *[K2tog] twice, [YO, K1] four times, [K2tog] twice
Rnd 4: P all sts
Weave in all loose ends. Attach buttons. DONE!
As usual, if you notice any errors in this pattern or have any questions, please contact me!