I've been thinking about this pattern. Isn't it just a slightly baggier version of the pithy hat
with a different cable? If you look closely, you can see that LL's hat is seamed (you can see where the two edges of the cabled pattern meet), but I think it would be easier to do in the round. I think this hat is adorable, and I've been meaning to make a pithy hat, so I'll play around with the cable this weekend and see if I get something even moderately similar.
P.S. As for how to handle the decreases in the cable pattern, if you look at the pithy hat pattern you only decrease on the last two rows of the hat before you pull the yarn through.
P.P.S. If you want something with a less gathered top (you can see what I mean by gathered in the pithy hat link with Kiki's red hat), Elizabeth Zimmermann gives a guide for how to make a beret in Knitting Without Tears
(I've sadly left my copy at school, 150 miles away, so I'll have to improvise). For those of you who don't care to spend money (although I've found it's totally worth it--I love her wit!), check out your local library.
Wow...I love parenthetical comments.