Here's a link to a tutorial for the friendship bracelet technique: How to make the Chinese Staircase Bracelet. You'll do it the same way with your cord. Just make sure you include your cord with the other strands not being used to make knots.
I bought my embroidery floss at Jo-Ann's. I bought 5 different colors and spent around two bucks (it was a while ago so I don't remover exactly how much I spent, but the stuff is pretty cheap).
I used most of the floss, but I did have a little left over, so you could maybe get away with only four skeins (is that what you call a unit of embroidery floss? I have no idea, but it makes me sound like I know what I'm talking about :)
Each color of floss is made up of six strands. I started out using all six strands of the floss. I tied a knot at the end and made my braid/knots over the tail. I alternated colors at random, pretty much whenever I felt like it.
I used rubber band to hold together the colors I wasn't working with at the time. I used a safety pin to hold it to the floor or my jeans or the couch. The safety pin is crucial; you can't tie the knots without one end tethered.
When I got to the fork in the cord, I separated each color in half so there were three strands of each color for both cords. I wound the floss around these handy little spools I printed from Wild Olive.
I continued to the ends, tied a knot at each end and sealed each knot with some clear fingernail polish.
The whole project took me a few days. I worked on it while watching tv in the evenings and on a longish car ride.
Overall I'm pleased with the results.
They're obviously much cuter now :) and it was very effective in keeping the cords tangle-free.
The cords are a bit bulky now. They take up a lot more space than before and they're a bit heavier. I haven't actually used them much, but I imagine the weight might be inconvenient while on a run or if you're moving around a lot.
I'd call it a success. Hopefully this is helpful. I'd love to hear how it goes if you try it out!