Why not use the dowel knitting needle tutorial right here in the knitting forum?http://www.craftster.org/forum/index.php?topic=25372.0
As AWynkoop suggested, I have some dowels that are the perfect size for a pencil sharpener. You might have to sand afterwards to get the pencil graphite off of the dowel if your sharpener has been used before.
katymcf, are you asking about the thread showing through the front of the bag? Or you just don't like the look of the thread showing at all? If you're talking about the thread showing through the outside, you don't need to pull the thread all the way through the knitting. You can just catch the needle through the fibers in the yarn and it will hold just fine. I used a whipstitch to sew my lining into place. If you're bothered by the thread showing when you're looking at the lining (inside the bag), you can practice making very, very small stitches. My mom makes the tiniest stitches when she hems, but I'm so terrible at it.