This page goes into more detail on a few points in this project. These notes are not necessary for the successful completion of this skirt, but they are useful to know.
This is not a hard and fast rule; some larger patterned fabrics make beautiful doll clothes. But if you're not sure, it's safer to stick to smaller patterns.
The other alternative is to hand sew the back seam through the elastic, and then machine sew the rest of it.
If you would like to make a shorter or a longer skirt, you can simply change the dimensions of the short side of your initial rectangle. Using your finished skirt as a guide, figure out how much shorter or longer you would like the next one to be, and either add or subtract that amount from the "short" dimension.
If you would like the skirt to be less full around the waist, you can subtract some length from the "long" dimension of the fabric rectangle. I would not suggest adding more than an inch or two of fullness if you would like it fuller; the more fullness you add, the more fabric you have to pull the elastic through, and that can become quite difficult.