An in-the-round version can be found on my blog here:
http://ohbabyo.wordpress.com/2011/06/20/knitted-cupcakes-...

Held sport weight double
Stuffed with wool
Used embroidery thread for “sprinkles”

Slipped first stitch of each row on liner, making picking up stitches pretty simple.

Knitted cupcakes in the round. Joined first round and pretty much knitted as written except knitted purl rows. (Stitch counts were exactly the same.) Also used kfb rather than k1, m1 to avoid holes.

As the pattern is written, the bottom of the finished cupcake isn’t quite flat. To remedy this, I used a large needle to thread the cast on tail up through the cupcake pulling the bottom flat and then tied the end of the tail to to the top of the cupcake before stitching it closed. (I hope that makes sense!) I also stitched the sprinkles on before finishing.

Each cupcake took about 2hrs to make.