Make your own painting tray with built-in rack! Part 1

This is the first of yet another multi-part tutorial. This time I am covering the building of a painting surface that has a rack built into it. This rack will have spots for brushes, paint pots, and even cups of water. (Or a beer! Your choice, assuming you are legal drinking age. Can't say it steadies my hand, but some claim it does.)

First: the supplies. You will need these as a minimum:

A board of 1/4" plywood, preferrably MDF
Finish nails
Some screws
A drill with multiple bit sizes
A hole-saw bit (At least 3", preferably 4")
A piece of 1x2 board

These are supplies I recommend in addition to those above:
Felt or cork for bottom covering
Staplegun (contractor grade, for attaching the felt)
2"x3" block at least 4" long (true measure)
Handles (the long-arc type used for some cupboards)
Files and sandpaper
Wood-Stain or gloss varnish