Cut the gray sock just below the heel. You can discard the ankle part.
Fit the toe part of the sock over the bottom fatter end of the styrofoam cone, centering the toe line in the center of the bottom of the cone. Pull the rest of the sock up over the cone. It should fit a little more than halfway up.
Glue the top cut edge of the sock to the cone. Hold the sock in place until the glue sets.
Taking care not to cut off too much of the fur, cut a 5 inch by 2.5 inch strip of the craft fur with your very sharp scissors. Cut the bottom corners off, leaving a 1 inch wide bottom and a full 2.5 inch top.
Apply hot glue to the back of the faux fur. Press the beard onto the gray sock so that the bottom of the beard is right around the bottom of the cone. Hold in place until the glue sets.
Cut the Christmas sock on the ankle, just above the heel. Discard the toe part.
Fit the Christmas sock over the top of the cone and down over the beard and gray sock, overlapping them a little. Apply hot glue to the bottom edge of the Christmas sock, carefully gluing over the faux fur and the gray sock. Hold in place until the glue sets.
Flip the gnome over to the back and cut a slit down the back of the Christmas sock. This is where you'll pull it together to make a pointed hat.
Cut the edges of the slit diagonally from the bottom of the slit to the top of the sock, taking care not to cut off too much. You just want to make small cuts so that the rectangular sock will form a pointy cone.
Starting at the bottom of the hat, hot glue the cut edges together to make the pointy hat. Glue a bit, then hold it shut until the glue sets. Glue the hat shut all the way up, doing a bit at a time and holding it together until the glue sets.
Apply hot glue to the back of the nose. Press it onto the middle of the beard, about ¼ inch below the Christmas sock. Hold it firmly until the glue sets.