Fold the rectangle in half, with the RS out and the hems lined up. From the remaining yarn, wrap a TIGHT, two-inch ball for the head.
Place the "head" in the center of the top fold and wrap a hair-band of desired color (we know this baby is a girl so that's why I used deep pink -- you could use ANY color). You can move the fabric around a bit to get a smooth "face" while tucking the folds around the sides.
For the limbs -- do the left leg first by measuring 6" from the hem up the left side and half the hem (6-1/2"), grab this section and wrap a band around leg portion tightly. Grab the remaining 4 inches and make the arm. Repeat for the right side. Play with these wrappings a bit until you have Raggy Maggy just as you'd like her.
This makes a GREAT teething doll -- easy to grasp, cotton that softens as it washes, and easy-care: just take off the bands, remove the head and wash the rectangle and re-make. The cotton soaks up the burbles and droolings of a baby and looks just as good the 300th day as on the first day.
CAUTION: occasionally check the hair bands for any signs of fraying -- replace immediately!