Cute huh?! I made this last year for my then 2-year-old to use for trick-or-treating but didn't bother to check the finished size before starting because I was too excited. It's really, really small so if you're going to use it as a Halloween basket you should probably make it bigger.
I added the "BOO" by carefully cutting letters from my leathery fabric then stitching a different printed fabric behind each letter right around the letter's edge. I altered the handle as well using corset boning so it would stay out of the way and so that my little guy could easily hold it.
Here is the link to Pink Penguin's tutorial which is not a Halloween basket - hers is super duper cute, you have got to see it. This is where I learned to box corners!
I think I need to make another one more like hers to throw all my strings in as I sew. Enjoy!