I did this myself not too long ago Mike.
The 2 pieces are seperate (or at least I re-upholstered them seperately and they look good). The original material seemed very thin, and I'd advice using a fairly thin material again so they slide over each other easily when back in.
I used a grey faux suede. It got it off a upholsterer so could pick out the closest colour he had. Its a nice texture too. You can get faux suede off the ebay too fairly cheap. That, a spray on glue (again I got this off the upholsterer), and a scalpel and you're sorted.
Oh, and the handle will pop out, so do this, apply the fabric all over, cut the hole for the handle, it will pop in, and you'll get a nice tidy finish.