Animals are capable of happiness and sadness alike. Although we can never tell the degree of emotion or the self awareness of such emotion, the actions that many animals take point to a range of feelings that are repeatable to those of humans. Elephants are extremely intelligent, and because of their long life spans and incredible memory, we have seen behavior that is quite amazing. These Elephants might really be happy.
The article talks about “knitting” but I think they’ve actually used both crochet and knitting. I don’t know how they would knit those granny squares with anything but the hook. But yes, they’re obviously knitting in one of the pictures and it looks like they’re working on the solid red part for the adorable elephant’s legs which doesn’t seem to have the same spacing as the multi colored parts.