Preheat oven to 250 degrees F.
Place Styrofoam cups upside down (open end of cup down) on a dark coated cookie sheet, placing them about 1-2" apart. Note: we experimented with both dark coated and silver cookie sheets, the cups did not melt properly on the silver sheets.
Bake in the oven for approximately 3 minutes, don't walk away! It will take about one minute before you see any changes to the cups, then the heat will begin to melt and shrink them rather rapidly after that. It's lots of fun for the kids to watch, so be sure to turn the oven light on.
Remove the cookie sheet from the oven and set aside to cool completely. DO NOT try to remove the cups from the cookie sheet until they are completely cooled. As they cool, the Styrofoam that is stuck to the sheet will relax and release its grip from the sheet, allowing you to remove them easily. Most cups will melt rather well, thought you may end up with one or two that look rather distorted or disfigured.
Paint the "hats" with pastel colors, one coat is usually enough, and allow them to dry completely. Once they are dry you can embellish them with small silk flowers, pretty beads, and ribbons using a hot glue gun.
If you like, you can hot glue a small round magnet to the bottom of the hat at the brim and hang on the refrigerator.