The shape and size of your miniature mallet can be altered in any way; the only limiting factor is that an area of the handle must be large enough to take a hole for the key-ring hardware. I use a basic split ring, and find that a 1/8" diameter hole is all that's required. The choice of wood is also wide open, but the close-grained varieties work best for miniatures. If you're unsure, and you need some ideas, have a look at the types of wood used for pen blanks. These can also be a good source of materials if your offcuts bin lets you down.

Use a blank approximately 2" long and 5/8"–3/4" square. Rough it down to the maximum required diameter and then mark the overall length—1-3/4" looks okay to me, but there's no right or wrong choice. Start by turning the rough shape (I use a sketch to remind me of my goal) and then add the desired curves. Finishing is important, since the key chain will be held and examined closely. So, take the time and the trouble to do a final sand with the grain, with the lathe turned off. A friction polish is my choice of finish; it seems to have stood up to years of abuse on an earlier version of a key chain I made.