I found some cotton lining and have finished the bag from the Scandinavian Needlecraft book by Clare Youngs. I used some cream 3mm thick pure wool felt for the bag, some wool felt scraps (1mm thick) for the embellishments and pearl cotton for the stitching. The fabric in the cut outs is a light denim from some 'too small' children's clothing. I really enjoy stitching in felt - because it is easy to bring the needle up anywhere through the felt and you don't have to worry about the weave of the fabric.
Sewing the bag together and pulling the needle through 6mm of felt can be difficult - especially where I was criss-crossing back over stitches - so I used some small pliers to pull the needle through - it is a lot easier on your fingers!
I am am so pleased to have finished this project - it has been on my 'want to make' list for a very long time! Now... I'm not exactly sure what I will do with this bag. It's not really a going out bag - but would be lovely have on display, or keep craft projects in.