Thanks everyone! Sorry it took me so long to post the pattern. My friend wanted to make one too, so I'm just posting the e-mail I sent her about how I made it:
Size 13 needles
Gauge: 10 sts/14 rows = 4"
Yarn: Lion Brand wool-ease thick and quick. You'll need a bit more than one skein.
CO 37 sts
Knit rows will always be even rows
"Cable" means: sl 4 sts on cable needle and place to the back, K next 4 sts, replace sts from cable needle back on main needle and K
Row 1, 3, 5: K1, *P8, K1, repeat from * 3 more times
Row 2, 4: P1, *K8, P1, repeat from * 3 more times
Row 6: P1, cable, P1, K8, P1, cable, P1, K8, P1
Row 7, 9, 11: K1, *P8, K1, repeat from * 3 more times
Row 8, 10: P1, *K8, P1, repeat from * 3 more times
Row 12: P1, K8, P1, cable, P1, K8, P1, cable, P1
Repeat rows 1 to 12 until work measures about 16 inches (or just fold it in half and see if that's how deep you want it to be). Just be sure to have completed a cable row and then six more rows before you bind off so that each side matches when it's folded up. Either bind off on the sixth row or 12th row. I don't know how you'll want to do it, but after the initial 12 rows, I just counted six rows and was sure to cable alternate sets each time -- less counting that way!
Fold RS together and seam sides using mattress stitch (if you don't know how to do this, there is an explanation in the stitch and bitch book or any other knitting book or online, of course). You'll be stitch through that extra purl row on each side
To attach the handles, count in four rows (so you're starting halfway through the first cable set) and loop around one handle using whip stitch through the center of each stitch right below the bound off row -- you can either just do that or you can go through each stitch and between each row, whatever works for you. Be sure to pull the yarn fairly tight. Then do the other side.
To make the lining, use a tape measure to go around the inside, so make one loop around the top on the inside to see how wide to make it (try to hold the tape against the inside as much as you can without stretching the bag) and then through the bottom to see how long to make it. Cut that amount of the fabric of your choice, being sure to leave about half an inch on each side and about an inch on the top for a seam allowance. Hem the top, then with right sides together, seam the sides. Then just stuff it inside the bag and hand sew it to the bag -- I stitched mine to the whip stitching around the handle, then just as inconspicuously as possible around the exposed parts.