Marcy asked me about the size of my Branching Out. It's done with Malabrigo Laceweight with burgundy beads. The needle is your average length (6-7" I would guess) dpn. The bag is intended to be used as a pencil bag, but works nicely to hold the yarn and wip. I would say that the bag is at least 8" long. Knitty.com says that both versions (sock weight and laceweight) should be 7" wide after being blocked.
Some troubleshooting ideas: I would say to knit a few inches and then spread it out on your needles to get a more accurate picture. Are you doing the 3 garter stitches on each edge? Again, blocked size is always different from unblocked. If none of this works, I can take a look at it and see what's going on.