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This is a website by an early music teacher of mine. There is a section on tying on frets, and a link that shows a diagram of the knot that is typically used for gut frets that are tied around the back of the neck. Typically you tie it on the neck a little higher up (lower in pitch) and then push it down to where you need it to be so it is in tune. With a little practice it isn't that difficult, and a little bit of paper or a match stick under the side of the knot can help to tighten a fret that is a bit looser than it should be.
As for the material used, some people have fret gut and some people use an old gut string from a higher pitched viol instrument. I think there are a few different takes on what diameter it should be based on period, country, and current practice.
If you are "converting" a modern double bass that is set up with relatively low string height, you will likely need to raise the nut and the bridge a bit. If you have bridge adjusters that part is easy. Depending on how permanent of a change this is going to be you could have a new nut cut for your instrument, or you could put a shim under the existing nut. Sometimes if you are going from steel strings to gut strings the reduction in tension is enough to raise the string height enough, but not everyone is that lucky.