The tea cozy pattern is all written up - a word of warning though, it hasn't been test knitted, and will probably need modifications for teapots different than mine. If anyone knits it, please let me know, as I'd love to see pictures.
Tea Cosy Pattern
This pattern is my entry for the first Craftster Knitting Challenge. It fits my nearly spherical tea pot, which is about 7 or 8 inches in diameter, but the cozy could probably fit a much larger teapot of the same shape, as the stitch pattern used is very stretchy. If you have a teapot with a spout that comes out of the body of the teapot opposite the handle, you'll need to make a hole in the cozy for this - a buttonhole in the middle of the center band would work. I think this would be lovely in a self-striping yarn like Noro Kureyon or Silk Garden, or Patons SWS. It should be slightly heavier than normal worsted weight yarn. Other stitch patterns could be used as well - I think it might be nice in ribbing for the top and bottom portions, with some other more decorative stitch for the center strip. However, this section needs to be somewhat stretchy, so choose a stitch pattern accordingly.
Worsted Weight Yarn (Lamb's Pride - Purple)
4.5 mm 16" Circular Needle
3 shank buttons
Gauge: ~4.5 stitches/inch, but it really isn't too important
Pattern Stitch: Garter Stitch Lace
Multiples of 2 stitches plus selvage.
Rows 1 to 6: K.
Rows 7 & 9: *YO, K2tog*.
Rows 8 & 10: *YO, P2tog*.
Cast on 12 stitches using removable cast on.
Work pattern stitch, leaving first and last stitch in garter stitch, for 10 repeats (100 rows).
Work 6 more rows of garter stitch, and place remaining stitches on piece of yarn to hold.
Pick up 54 stitches along long edge of strip. Work 1 repeat of garter stitch lace. Work 4 rows of garter stitch.
Next row - *K1, k2tog; repeat from * across.
Knit 1 row. Cast off loosely, or use sewn cast off.
Repeat this process along other long edge of strip.
Place 12 cast on stitches onto circular needle, and knit 10 rows in garter stitch, then cast off.
Place other 12 stitches onto circular needle, and knit 6 rows in garter stitch.
Next row: K2, YO, k2 tog, K1, YO, K2tog, K1, YO, K2tog, K2.
Knit 3 more rows of garter stitch. Cast off.
Sew on buttons matching them to the holes on the other side of the cozy. On top edge of cozy, add crochet chain ties (chain ~40), to tie over top of and below the handle. A bottom edge, sew up the bottom 1" of garter stitch, right below the handle. Weave in the many ends. Tea cozy can be blocked on the teapot it is to fit, but it really isn't necessary - blocking would open up the lace, reducing the heat-retention qualities.