Nachtrag: Ich weiß nicht, wieso der Link oben nicht funktioniert.
the size will depend on your gauge. You can use a thicker or thinner yarn without problem, but it has to be a feltable yarn and will show best when it has a colourway.

A little gimmick of the bag I found out later. Push the handle into the bag and fold it inside - store it as an abstract sculpture :-)

added June 11. 2009:

Several people seem to have difficulties how to knit the handle. Ravelry member horsetuna described it in her project in other words and allowed me to copy it here:

Note: when doing the bottom, when you reach the ‘go backwards in reverse’ part, basically that means after you knit the 30/30, you knit another 30/30, then go to 50/50… like a giant sock heel. The final shape should look like an orange wedge peel with the handle coming from the tips. The shortest rows will be at the very bottom of the basket. I hope this helps!

Thanks a lot to Horsetuna, that she allowed me to copy this. I really hope this might help you understand how the handle is knitted.