Dainty Baby Dress Pattern

I'm a member of the Cygnet Yarnstars group on Facebook. Every month they challenge 5 members to design something using a ball or less of their yarn. I was lucky enough to be selected for their May competition and this is my entry.
Dainty  Baby Dress Pattern:
Using 3mm circular needles or whatever size necessary to give tension gauge of 28 stitches x 32 rows = 10cm x 10cm and 1 ball Cygnet Kiddies supersoft 4-ply.
Cast on 154 stitches and join in the round. Knit 6 rounds.
Next round: [K2 tog, yo] to end of round.
Knit 6 rounds. 
Fold the bottom edge up so the wrong sides of either side of the eyelet round are together. Knit each stitch with the corresponding stitch from the cast on edge. This will give you your picot hem.

Place marker at beginning of round and another after 77 stitches.
Knit 7 rounds.
Next round: K1, K2 tog, knit to last 3 stitches before marker, K1,s1,psso, k1, slip marker, k1, k2 tog
knit to last 3 stitches of round, k1, s1, psso, k1. (Dec round)
Knit 7 rounds 
Decrease round.
Knit 7 rounds
Decrease round.
Continue as set with a decrease round every 8th round until 126 stitches remain.
Knit 4 more rounds. 
On the next round knit 25 stitches, knit 1st row of chart, knit to end of round. (The chart, which is in my previous blog post, is over 13 stitches so for the first row of the heart pattern you would knit 25 stitches, then knit the 13 stitches of the chart - knit 6, purl 1, knit 6 - then knit 25 stitches to the marker.) 
Knit a further 5 rounds continuing with the chart.
Next round cast off 1 stitch, knit 24, knit next row of chart, knit 24 cast off next 2 stitches knit 61 cast off final stitch of round.

From now on we will be working the front and back separately.

Front: Starting with a purl row decrease 1 stitch at each end of the next 6 rows, while continuing to work the chart across the middle 13 stitches. Complete the chart. Knit 7 more rows of stocking stitch. 

Knit 18 stitches. Turn (working on these 18 stitches only) purl 2 together, purl to end of row.

Knit to last 2 stitches, Knit 2 together.                                                                                        

Repeat these two rows.                                                                                                                

Purl 1 row.                                                                                                                                   

Knit to last 2 stitches, Knit 2 together.                                                                                        

Repeat these 2 rows 4 times.                                                                                                        

Knit 2 rows stocking stitch. Cast off.                                                                                           

Slip 13 stitches onto stitch holder.                                                                                               

Rejoin yarn and knit remaining 18 stitches.                                                                                 

Purl to last 2 stitches, purl 2 together,                                                                                          

Knit 2 together, knit to end of round.                                                                                           

Repeat these two rows.                                                                                                                 

Purl 1 row.                                                                                                                                    

Knit 2 together, knit to end of round.                                                                                           

Repeat these 2 rows 4 times.                                                                                                         

Knit 2 rows stocking stitch. Cast off.                                                                                            

Back: Rejoin yarn to back,and starting with a purl row decrease one stitch at each end of the next 6 rows (49 stitches).
Continue to work in stocking stitch until the arm holes measure 3 inches (for me this was 18 rows) ending with a WS row.
Knit 13 turn,
Purl 2 together, purl to end.
Knit to last 2 stitches, knit 2 together.
Purl 2 together, purl to end.
Knit 3 rows stocking stitch.
Cast off remaining 10 stitches.
Place centre 21 stitches onto a stitchholder. Knit to end of row.
Working on last 13 stitches, purl 11, purl 2 together.
Knit 2 together, knit to end,
Purl to last 2 stitches, purl 2 together.
Knit 3 rows stocking stitch.
Cast off remaining 10 stitches.

Join shoulder seams together.
Neckline: Knit across the 21 stitches on the stitchholder at the back, pick up and knit 6 stitches along the back shoulder shaping, 12 stitches down the front, knit across the 13 stitches on the stitchholder at the front, pick up and knit 12 stitches up the front and another 6 stitches down the back, place marker and join in the round. (70 stitches)
Knit 3 rounds.
Next round: [knit 2 together, yarn over] to end of round.
Knit 3 rounds.
I'm lazy and I hate sewing so I folded over my rounds to give the picot edging and I knitted each stitch with the corresponding stitch I picked up from the base of the neckline and cast off. If that sounds too tricky or you don't mind sewing just cast off as normal, fold down the last three rounds to give a picot effect and sew the cast off edge in place.

Armholes: Pick up and knit 52 stitches evenly around the armhole. Place marker and join in the round. Knit 3 rounds. Next round: [k2tog, yo] to end of round. Knit 3 rounds. As before either cast off and sew cast off edge in place or pick up and knit stitches from the base with the current stitch and cast off.

If anything doesn't make sense please leave a comment and I'll try and explain a bit better.