Those instructions are tough.
Put the fabric right sides togather with batting on the bottom not on the top. Sew 3 sides togather, trim,turn. This is the pillow part.
The blanket part is done the same except you leave the opening on the side for turning. The pillow part is sewn on the top of the blanket, open part in seam. Round the corners. Trim, turn. Then you choose which side you want the pillow part sewn to. It is like a flap at this point. Sew down both sides of pillow part and all the way to the bottom of blanket part. Then you fold both side in on the stiche line, then fold from the bottom and tuck inside the pillow part.
It is so hard to explain without pictures.
Be sure and center the pillow part to the blanket part before sewing on.
Iron afer you turn.