I have no idea if this is a common, well-known way to felt, since I knew exactly nothing about felting before Saturday morning. Now I know nothing plus 24 hours worth!
Here's the finished purse. Notice the handle was the top edge of what you saw in the previous picture. There are two half-moon pieces, one is under my keys and the other is still attached to the purse, as the flap. The piece under my keys is folded over and shows the inside color of the purse - red. The outside colors are blue and aubergine, which unfortunately look like purple and red in this picture. The wool in the red basket is my next project, which I'll write about shortly. (Remember what "shortly" means??)
It turned out completely differently than I imagined it would, which I've been told is one of the charms of this type of work. It looks better in real life than this picture - I'll try to remember to take a picture of it in natural light one of these days. Sparky likes it already!