First I had chosen a pattern. In this case it was the title screen for Yars' Revenge on the Gameboy Color since the mesh I had purchased earlier was a perfect size for recreating Gameboy screens and I was looking for another to do to use up what I have. However, the margins are really tight on the top and bottom and since you should hook the yarn to the straight strands which run vertically at this oreientation, it may not be ideal. But it does the job. We'll just see how it looks after it's done.
So, here's my pattern.

The problem is, there are quite a few different colors here. This is a problem with recreating photographs in latch hook. You have to deal with subtile color differences, possibly dyeing some yarn to get it right, etc. I had planned to reduce the colors a bit, and bought the light blue and other yarn and then I saved the file as a 16 color .bmp

This was a boon as all the different shades of blue turn to grey. This reduced me to about a half dozen colors. However, due to a quirk with MS Paint, these colors didn't save properly as a 16 color bmp. For some reason, when I accessed it later, the grey would turn a greyish blue and the brown would turn grey. It seemed like every time I accessed the file the colors would change. This was solved by saving the file as a 256 color bmp. Computers are weird.
Next the problem was transferring this to the mesh. You can work without doing this by just looking at the picture, but I prefer to get all the mistakes out of the way before I hook any yarn. So I bought some magic markers and white out. I had used Sharpies before on the Mario rug, and prefer them to the washable Rose Art markers, but they're washable, which turned out to be important. To make it easier to to tell what is what, I changed the colors before transferring, making the black white and the white black, etc. And here's the results.

I'm not that good as selecting colors for this just yet, but it works better than trying to match the color as seen in the original.
Transferring it turned out to be a right pain. Attempting to blow up a picture, even the reduced color one, would create shading which cheapo art programs do these days to keep the picture from looking blocky. But this is pixel art. It's supposed to be blocky. So this was frustrating. I eventually zoomed in to the picture using the art viewer program which was almost, but not quite, as big as the mesh and then laid the mesh over the screen and copied it by hand with the washable markers. I cannot not recommend this method enough. but it got the job done.
[URL=http://s1146.photobucket.com/user/thean ... n.jpg.html]

Sorry about the picture quality again.
Upon reflection, this would be an idea use for silk screen. This is no doubt how the major kit makers do it. Were I to make this into a sideline, I might offer the option to buy a kit with pre-cut yarn (or not) and a patterned mesh. Not going to do that, but it's a good idea, I think. Particularly if I were to make a sideline out of making these things. A quick and easy way to transfer the pattern would be a good idea.
So now comes the real work, which there are hundreds of videos showing you how to hook a rug, so I won't bother. You may notice the weird corner in the upper left. I was going to fold over the mesh and hook through multiple layers to finish it, but I tried to reduce the amount of mesh in the corner by cutting it and, well, it's kind of unraveling there. So I'm going to go with the binding again after all and hope the rug doesn't fall apart before I finish. Hooray.