I kept going back to this and this; only, I knew this was going to be heavily used furniture and expensive, precious things have no place in our home for reasons shown in the photo below. This left me with an Ikea hack I'd wanted to try.
The couch- After deciding to do it, we bought a Karlstad couch from Ikea the next day. I normally wouldn't like this couch very much because the cushions seem shapeless without actually being overstuffed or comfy; but I knew the tufting would add some structure.
Spending the day at Ikea was the hardest part of this project. I get that it has lots of quirky, affordable home furnishings, I just resent being herded through a labyrinth of Danish modern to pick up one thing. The intention is to weaken my resolve so that, by the time I reach the stairs, I'll fill my cart with every throw pillow and fake potted plant I see. My first impulse was to stalk away without buying anything, shouting, "I'll show you! I'll make my own sofa from pallets!" However, the two hour drive to get there curbed any outrage. My son thinks it's the Ross of home furnishings.
Button fabric- I picked up an extra throw pillow in the same fabric as the couch to use for covering the buttons. Set up was easy and I Scotch Guarded everything until the room was spinning.
The legs- On our way home from Ikea I ordered tapered, oak legs from Uncle Bob's Workshop, which I'm hesitant to list because we waited so long for them to arrive. They were made to screw right into Ikea furniture, so no mounts were needed. I've since seen that Pretty Pegs offers Ikea replacement legs too, but at twice the price.
(Compare the original legs with the tapered oak.)
It wasn't hard at all; just make sure you have more twine than you think you'll need (maybe 20 in. of twine per button pair, or about 27 ft. total) for easy gripping. Once you've pulled the twine through and attached both buttons, don't be timid about bringing them fairly close together. I was unsure if I was pulling too much, so I left the twine ends hanging from the knots until all of the tufting was done. This gave me the option to loosen or tighten, as needed, before snipping the ends. I opted out of tufting the seat cushions, though I love the look, because the upholsterer told me it doesn't feel as good as it looks and the buttons get pulled off easily.
large Karlstad sofa with cover- $599
ready to screw on tapered legs- $88
Button covering for 40 buttons (we got a few extras)- under $15
nylon upholstery twine from Joann- under $15
extra throw pllow for button fabric- $29
upholsterer's needle- maybe $5 (it has now been months since I purchased it.)
We also bought two extra throw pillows for the couch- $60
There are less expensive tufted sofas out there, on sites like Home Decorators Collection, but we've sat on Ikea sofas before and knew what to expect. They can also be handled in the showroom before purchase. I really wanted to go with something slipcovered for easy care, and there are sites, like Bemz, that specialize in Ikea replacement covers if we want to update them. Given the fact that in the first week we had the couch I spilled a glass of red wine on it, I'm think slipcovers were a good choice.
(We now have multiple scratchers set, strategically, around our house. We are hopeful.)
Edit 11/19/12 - This hack was featured on Ikea Hackers site.