I finally did it! I started and finished a toe-up sock! I cast on with my Posh Yarns Lucia in the color Passionate (from the Pick Up Sticks Sock Club) Friday night using the magic cast-on from Knitty. I decided to try a peasant heel as I haven't been happy with either short-row or reverse heel flap heels. Early Sunday afternoon I finished up the sock and I love it!
I basically googled various sites for the directions so I don't have a specific source to point anyone to, but really all you do is when you are about 2 inches short of the total length of your foot knit across half of your stitches with scrap yarn then purl back with the scrap yarn. Then simply pick up your sock yarn again and carry on knitting.
Whenever you want to, go back and pick up all the stitches that are on the waste yarn. I picked them all up before I took out the waste yarn just to be on the safe side. I picked up all of one side on one needle and all of the other on a second needle. Then start knitting the heel with your sock yarn (or a contrasting colored yarn would be cute), picking up 2 or 3 stitches on the ends between the two needles just to prevent holes (so you'll probably pick up a total of 4 or 6 stitches). You'll want to knit the heel on 3 or 4 needles.
From that point simply treat the heel as you would a cuff down wedge toe, decreasing 4 stitches total one round, knitting plain the next, over and over, until you get down to however wide you would like your heel to be (I decreased down to 12 on each needle, but next time I'll decrease down to 10 or 8 I think). Then just kitchener stitch it shut and voila! You have an incredible nifty looking and nifty fitting heel.
This heel technique opens up a world of toe-up sock possibility. Hooray! I'm already on the leg of the second sock. These knit up in no time.
FYI: The peasant heel is often times mistakenly called an afterthought heel, but there is a difference. A peasant heel uses waste yarn to mark where the heel will be (and that may make it easier to pick up the stitches). An afterthought heel, specifically that found in Elizabeth Zimmerman books, involves just knitting straight through without using any waste yarn and then coming back and snipping the yarn where you want the heel to be. I can see that going horribly horribly wrong for me, so that's why I chose the peasant heel.
One more note...please ignore any laddering you may see in the photo. I was too excited about this sock to wash and block it before I took the photo!