I have made some of these bags. Before you sew the outside of the bag together you sew the handles and button loop to the right sides. You sew 1 handle to the front of the bag the other to the back side of the bag and the button loop to the backside of the bag. If you look at the diagram it shows the handles coming down on top of the bag. Sew them on the fabric side, not the fleece side. Once those are sewn on you sew the outside bag together, box the corners and then you are ready to sew the outside bag and the lining together. When you pull the bag through the hole in the bottom of the lining the handles and button loop will be between the bag and lining. Make sure you don't twist the handles when you sew them on. Clear as mud? :D
HTH