First of all, I cut into a merino wool (scratchy) sweater that looked exactly like the purple one here, then I sewed it together. My original thought was to leave extra on each side of the two middle panels (which were cut crosswise from the sleeves) in case they shrank more than the front and back panels which were cut going the length of the sweater. I made my panels really wide, so they used up almost the whole sweater.
I washed the scarf in hot water and a little detergent, putting it in a mesh bag and throwing in a couple light colored items to provide some friction, which is necessary for the process to work. I thought this was called "felting" but I read somewhere it's actually called "fulling".
After putting it through two wash cycles, it looked done, meaning the stitches were no longer visible. I pressed it using the iron's wool setting because it looked pretty rough. If you like that effect you could skip the ironing. I wear it with the seams on the outside. I decided not to trim the edges after all--the seams and the fraying gives this warm accessory just the right "destroyed" look that I do love, after all. And the best part--it's soft now, not scratchy !