Step 1: Design
Step 2: The Rough shape.
Cut a front side and a backside.
Start by stuffing bunched up newspaper in the pinata to give it shape.
Then tape the edges with masking tape to hold it together and help maintain it's shape. (don't go all crazy with the tape use just enough to help keep its shape until the paper mache hardens.
(although I did think it would be a good joke to rap the whole thing in duct tape then use fiberglass resin instead of the paper mache mixture, but I found the cost prohibitive)
For the chain to hold the pinata up. Drill a hole just big enough for a chain to go through in a piece of wood the size of the top of your pinata. (My piece was 10" x 4" wide.) Then I inserted the chain. Where it came through on the opposite side I put a nut and bolt to keep it from pulling through. This was the top support, now to support the bottom I just ran duct tape down to another piece of wood at the bottom. Wrapped a few times until I thought it was strong enough to support the weight.