So first I went to goodwill and stocked up on sweaters. The one on the left is the one I wanted modify; it's a cashmere-silk blend mens sweater. The other two were the ones I wanted to use to make the dog sweaters/applique. I felted them really lightly to make them a little easier to handle. Key when choosing your sweaters: make sure they're natural fibers, and if you're planning to felt them, make sure they're something that will. (Hint: cotton frays easily. Don't use that for the modified sweater.)
First step: make the men's sweater slightly more feminine. I laid it flat and cut the sleeves at 3/4 length, removed the band at the bottom, and made the top into a boat neck.
Step two: finish the sleeve edges. I used the ribbon that I had on hand, which happened to be this awesome polka-dotted stuff. I sewed it on flat, with a running stitch, first, then turned it under and whipstitched it in place. And then I added a very fine row of top-stitching near the edge to keep things smooth (not shown). I didn't do this on the neckline or bottom, because I wanted it to have a little bit of a looser feel. I may rethink that plan, though.
For the applique, I just cut a heart out of the lightly felted sweater. I lay the whole thing flat and smoothed it into place, then started stitching with a running stitch.
Rather than trying to pin it in place, I just kept it all flat on the floor and rotated the whole sweater as I sewed. (I can see this being tricky if you have carpeted floors, though.) Make sure you only go through the top layer!
Voila! Heart sweater. I am pretty happy with how it came out. Would love if it were a little longer, but will totally compromise on that because it's so SOFT. (Decidedly softer than some of the others I was looking at.)
And yes, I will so totally wear this post Valentine's Day. Everyone needs more hearts in their life!