ah thanks ladyharriet - I wasn't too gutted as it only took an hour or two and was getting very tatty, so I had been planning to replace at some point anyway - still annoying though
fishpond - if I were you I'd see if you can find a pattern in quite big yarn to start with (you could do a very simple blanket like this one for example - www.purlbee.com/super-easy-baby-blanket/ ), or something very small - it's nice to start with something you can actually finish to get a sense of achievement! I keep taking on projects that take too long then abandoning halfway through.
the site that pattern is from - www.purlbee.com/ - is great for inspiration and free patterns - the yarns they specify are ones they sell, which are mostly redonkulously expensive, but just get something cheaper that's the same kind of size and do your tension square to make sure the gauge is right before you start and you'll be fine.
also check out ravelry - access to heaps of free patterns uploaded and tested by users. I have hardly used it but I know lots of people find it really useful.
oh, also I'd recommend knitting in acrylic. the natural yarns are lovely, but I have a couple of handknitted woollen things for DD from my Mum and although the yarn says machine-washable it's warped quite a lot, whereas a little acrylic handknitted cardigan I got in an ebay bag of stuff has held up beautifully through loads of washes and still feels really nice. or maybe cotton would work well too; should wash better than wool at any rate.
re yarn and needles - I'd find a pattern you want to try first, then just buy what ever yarn and needles you need for that pattern. (Just don't do anything that requires double pointed needles!)
£4.33 on a few bits and pieces from the corner shop today. Not too bad. DP is tracking his spend as well now though (obviously the frugal fun is infectious!), which is quite useful as then we can see where we both spend money and where joint expenses fall and so on.