Now that I figured this out, I tried again, and this is what I am getting:
It actually looks like it should. Also, because I am wrapping the yarn the wrong way on knit stitches only, this explains why my stockinette has always looked a little funny (except in the round). Not that there is a stripe, but it looked like the knit stitches were twisted only they weren't really. I am almost done with the shrug, so I am going to keep at it with my old style of yarn overs, since I don't want to frog the whole thing. It doesn't look bad, I'm just being picky. But I am motivated to work on the scarf again!
I ended up ordering something for Susan from www.kpixie.com. I just love browsing that site and maybe someday I will get something for me from there. I'll wait until after her birthday to tell what I got for her, just in case she is reading. :)
Here's the shrug progress - I'm on the ribbing now:
