The needlecase is pretty easy to do.  Make sure you have the rectangle marked on your foundation fabric (the piece of muslin that you sew your fancy fabrics on).   I traced the whole pattern including the rectangle stitching lines and then transferred them to the muslin before I started sewing the fancy fabrics onto it.  The fancy fabrics will go on the opposite side of the muslin from the lines you have drawn.  If you are familiar with paper-piecing, it's done the same way.

Now, once you have your CQ fabric made and embellished, layer a piece of fabric that you have chosen for the inside of the needlecase, right sides together with the CQ "fabric".

Since this is a needlecase, and you will be sticking needles inside it, I also put some batting in it.  So, take a thin piece of batting, and stack that on top of the lining fabric.  (I usually start with the batting larger than my piece, and then trim it close to the stitching when I'm finished.

You may want to pin it here and there just to keep everything from shifting.

Now, turn the whole stack over, and stitch on the rectangle that you have drawn on the muslin of your CQ piece--make sure to leave about 2 inches open for turning it right side out.  The batting will be on top of the feed dogs of your  machine, but that shouldn't be a problem.  You could also sew it by hand if this step is too difficult for your machine to handle.

Once you've stitched the rectangle, trim the corners off (and trim the batting close to the stitching), turn the whole thing right side out, and hand-stitch the hole closed.