This is the "Guideposts Surprise Sweater" I've been working on for a while--it's based on the Classic T-Top Sweater pattern from Guideposts magazine's Knit for Kids Project, altered to work completely in the round. I made the smallest size, since this was a test run. Here's the basic instructions:
Cast on twice the number of stitches the pattern lists for the size you want. Work in garter stitch for 10 rows. Work in stockinette to appropriate length. Place end-of-round marker, and 4 other markers--two of them 1 stitch away from end-of-round marker. The other two should each be 1 stitch away from the exact middle of the round.
Work in garter stitch (which, in the round, is "knit 1 row, purl 1 row"), increasing 1 stitch on both sides of each marked stitch every other row for a total of 8 sts increased every 2 rows. You must use mirrored e-loop or lifted-stitch increases--knit-front-and-back is too one-directional and produces a badly twisted sweater.
To rephrase the above increase instructions, in hopes that my readers can figure out what I mean one way or the other: On knit rows only or on purl rows only--your choice--do two mirrored increases by each marker except the end-of-round marker. One increase on either side of the marker.
When the garter-stitch portion of the sweater is large enough for the size you're knitting, bind off beginning at end-of-round marker. Cut yarn. The sweater will now look something like this:
Fold the garter-stitch portion so it looks like the picture at the top of this post. With separate pieces of yarn, sew up shoulder seams. Weave in all ends.
Note: If some enterprising seam-hater wants to try three-needle bindoff on the shoulders, be my guest. Personally, I think it's impossible to do without breaking and rejoining the yarn way too much.