I don't know if I'm folding something wrong; in my paper the strip from step 8 is a lot shorter. Is the image from the diagrams not proportional? At the end I'm unable to fold the handle as high as it's seen in the diagrams .
Just tried it and ran into the same problem as you. The proportions in the diagrams can't possibly be right.
What might work is to disregard the upper and lower horizontal lines in step one and instead make the shaded area square. That way the handles get at least a little bit longer, but not much.