Yep, it is just a tube. I cut over like two inches and down three inches for the arm pits and then I put elastic in the neckline then the ribbon just inside the edges so the ribbon does not go through the entire casing of the neckline.
So far all of the pillow case dresses I have made have been made out of two coordinating fabrics. I even made one for myself when I was pg that matched 4 yo dd's outfit and then I made one for her doll. I also had two pairs of identical black maternity pants so I put a cuff on the bottom of one of the pairs of pants to match the shirt. It was really cool!! But I did make the shirt a little to big for myself and I ended up having to cut it down after I made it.
I also have a beautiful peach sheet that I got at an auction that has lace trim that I want to make a pillow case dresses out of for both DD's. The sheet was actually free because my mom got a whole box of misc blankets and sheets to throw in her puppy cages and this sheet was in it and I snatched it out!