I was wasting time one evening browsing different sites when I came across this:
After posting about it on http://www.craftster.org/ and getting many suggestions on how these were knit, I came up with the above.
I ended up knitting it like a sock from the leg to the toes. I used short rows for the heel and decided not to do the yo eyelets. Instead, I incorporated some intarsia stitches to create the toe triangle. I would now vote against intarsia and for duplicate stitch instead! What a mess.
I am still not completely satisfied with the result. The major complaint I have is that it does not seem like it would stay on a baby's foot. We'll see.