Step 3: Eye Holes
When you get to the right length and you want to begin the eye holes, mark the width across both eyes with a string of contrasting colour. Bind off that many stitches on your next row (try to count how many you're binding off).
From here it's like working one big short row. Just knit normally until you get to the end, and turn the whole piece around. Purl your way back to the start. Keep knitting and flipping until you've gone to the bottom of your eyehole. It's wherever you want it to be, really. Just make sure the hole is big enough to see out of.
When you want to build the bottom edge, just cast on as many new stitches as you bound off. Simple? Yeah, it is.
To separate this into two discrete holes, you'll need to knit a bridge from the bottom of the hole to the top. Find the middle and measure out a little to either side. Mark off the edges of your bridge, grab some needles (you can use straight needles, or just slip your hat onto some yarn and use your doulbe pointed needles. Pick up some stitches from the bottom edge and knit back and forth until your bridge is long enough to connect the two. Making it a little short will pull the eyes down menacingly.
Finally, connect the bridge to the top. Don't ask me how I did this. I kind of blacked out there for a while. Just make it up and hack it out. If mine looks ok, yours will look fantastic.