ok, here's what i made out of the first altered fabric i made. the don juan marteen purse. i made it for his grrrlfren'. i THINK she liked it!
first i made the fabric
next i knitted up a purse. it doesn't have to be perfect because it's felted. knit it a bit bigger than you want the purse (it's going to shrink) and it MUST be knitted out of 100% animal fiber (like wool or alpaca). once knitted and sewn together, throw it in a pillowcase and toss in the wash (along with other items so it gets agitated). if possible wash on hot, if not warm will do. if for some reason it's not felted enough after the first wash, do it all over again!
i then cut out a front and a back and a little pocket from my altered fabric (to fit on and be sewn to the felted purse). i added some bead embroidery PRIOR to sewing to felted purse. i also sewed a little pocket (for credit card or whatever) on the front of the altered fabric. i used the blanket stitch to attach the pocket and to attach the altered fabric to the felt purse. i cut out a button hole on the felted purse (or you could knit one in, but i was lazy) and blanket stitched around that too. i sewed on a front button to close the purse and it was DONE DONE DONE!!!