Now take your bodice pieces and pin them together around the neck hole, matching all the sides and corners.  Sew around the neck hole using a 1/4" seam.

Clip into the seam about every 1/2", or less, so that when you turn it right side out, the circle will be nice and even and not shaped like a multi-faceted polygon.  Be careful not to cut into the stitching.

  Take one of the layers, either one, and stuff it through the neck hole.

 Now lay the two pieces together nice and flat, matching the sides, and press the neck seam.

Next, watch. 

Turn up a 5/8" hem on the sleeves, turning both the bodice piece and the lining piece to the inside of the fabric, matching the edges at the fold.  Press, then top-stitch close to the edge.  Set the bodice aside.

Now for the towel/skirt. Using your longest stitch length (basting), make a row of stitching 5/8" from the cut edge of both towel pieces, leaving several inches of both spool and bobbin thread at both ends.  Do this again 1/4" inside the first stitching line. 

You are going to gather the towel so that its width will match the width of the bodice. Anchor the bobbin threads down at one end by inserting a pin and then wrapping both threads around the pin in a figure eight. At the other end of the stitching, pull both bobbin threads together with one hand, and with the other slide the fabric along the thread so that the towel edge gathers.  When the towel width matches the bodice width, anchor this end of the thread the same way you did the other.

 Adjust the gathers so that they are even across the "skirt".  Now pin the towel to the outside front piece of the bodice, right sides together, keeping the lining clear. 

 Set your stitch length back to normal and sew from one side seam to the other, backstitching at each end. This is easier if you have the gathers on the underside. Repeat these steps with the back pieces.

Lay the "dress" out flat so the the inside is face up. Press the seam towards the bodice.  Your facing should be loose. Turn up the bottom edge of the facing 5/8" so that the pressed fold lies on the stitching line, and hand-sew it down across the bodice on the inside.  If you are going to add trim along the front here, you can just machine stitch the facing down, since the stitching won't show under the trim. You will now have a finished seam with no raw edges showing.

Here is Amy, demonstrating how your "dress" should look now: 

 You're almost done!  Now you can decorate with buttons and trim around the neck edge, sleeves, and/or bottom of bodice.  Just stitch the trim on over the fabric, wrapping the ends around the back side. The final step is to cut four pieces of 1/4" or 3/8" cross-grain ribbon to about 8", and tack one piece to the right and left sides of the front and back of the bodice seam. I use a bit of FrayCheck on the raw edges of the ribbon, to keep it from raveling. Use your imagination. Hang the dress over your oven door handle and tie both sides. Voila!

If you have questions leave a comment, and I will answer in forum style, commenting back to you on this page. Happy sewing and giving!