I've looked at the article on this site on how to make a cowboy hat, and also some photos in the galleries, but I have a question.. How do you cut the notch in the top (how much)?

I can tell you how I did it....I carved a little from the sides of the top of the cake, frosted it, and then rolled two long sausages of fondant, placed those along the top of the cake and then covered it all in fondant. I'll attach a picture here in a second.
http://www.cakecentral.com/cake-photo_1395711.html
I didn't carve any out of the front or back of the hat. HTH!

^^^ I did it the same way !

I recently made a cowboy hat cake and carved notches in the top of the cake. I used 3- 6" layers and think it looked great. At the reception they had to put a card by the cake saying "grooms cake" because the kids kept wanting to pick it up and try it on. In a strange way that was a huge compliment to me. hahaha

I tried to attach pictures but couldn't re-size them correctly. Maybe I'll ask for some help and try attaching them again later tonight.