Now, I have no idea what the correct way to do a collar like this is, so here's how I do it. First I cut the collar shape and baste around the edges on the bottom piece- I was using 3/8th seam allowance, so I stitched in 3/8ths from the edge.
Then I lay some ric rac down on the collar, with the center right over the stitching, and baste it in place. Finally, pin the collar top on, and stitch again at 3/8ths. I go over the original 3/8ths line so that I'll get exactly the center of the ric rac in place. If you have a sharp corner, don't forget to clip it before turning. You could also trim or clip the curved seam
Now turn it right side out and iron, and you have little bits of ric rac poking out the edges!
The reason why I'm making up teensy peter pan collars is that... I made one of the easter dresses. This is Ana's version. It needs a back zip and sleeve and skirt hems, but here it is. I used BWOF November 2007 #136. Sadly it's hard to photograph the bunny print on the skirt, it just looks washed out here.
I will probably also put some ric rac over the skirt seam where the band meets the bunny print, but I want to figure out the end length first.