They should be at least 4 inches - and that's a magnificent quilt!
Here's the link to the AQS (Paducah) requirements:
http://www.youtube.com/watch?v=m_Vd82aSiAA
I actually do it so I don't have to turn it inside out - I just put that seam against the back of the quilt (but I think I'm going to change my method).
But you get the general idea. ;-)
I do like how her method gives the extra room for the rod/dowel.
I love Bonnie - she really covers all the bases in that video - the poof, sewing down the sides, etc.
Good luck in the show