I'm going to make it from a leather-like vinyl. I've seen the knitting pattern for a similar hat (without the chin strap) but I'm really bad at trying to translate how one material will behave compared to another.
Sounds great. I'm planning a pirate bathroom (I'll post results when I actually get somewhere with it). Here are a couple more ideas:
Floor covering: maybe make a floorcloth and paint with whatever theme you like. Maybe a big ship, a jolly roger face (if you're not overloaded with them already), some palm trees, etc. Basically anything you can paint.
Wall decor: big ropes (a la Long John Silver's restaurants!), maybe some scabbards- i think that's what those big swords are called. A birdcage with a fake parrot.
Oriental Trading Co. also sells tons of cheap island-tropical-hula-etc. decor. You can get grass skirts, etc. and cover any unsightly parts of the room.
Your living room is going to be great- be sure to post pictures when you're done!