Re: Knitting
There are few ways you can learn knitting. Either you can borrow some books from the library or you can purchase a book from zellers, walmart, lewiscraft or michaels. Michaels, do offer classes in knitting so you might want to attend one. Personally, i couldn’t learn any of that stuff by looking at those books 
Here’s a link to Michael’s baby section of knitting that contain instructions to some knitting projects.
http://www.michaels.com/art/online/search?type=4&keywords=Baby&channel=4&pageNumber=1
Maybe, you might like or understand something.
I don’t know about others but my mom finds its easier to do crochet instead of knitting..she uses the same wool though.
If i had to make something personally..i would have opted for sewing instead of knitting because sewing appears easier to me than knitting..but then, its just me. Maybe, you can just buy some quilted baby fabric or fleece fabric..and make the blanket by stitching four corners. You can even add some nice borders to that blanket. Don’t you think its much easier? Or how about stitch a tiny unisex clothing..you can even get cute stick-ons for the dress that you can iron on. For stitching ideas you can visit fabric land or the above mentioned stores or library 
Good Luck!