FAIR WARNING: This post is all about some pictures.
The following is an account of how I figured out how to get rid of those crazy holes between the heel flap and the gusset in the socks I knit when picking up stitches. It is also a step in my own personal clarification on heel/sock creation. You may find your idears differ from mine, and that's all groovy because not everyone can agree on everything, savvy?
To illustrate the bane of my sock knitting existance:
That hole should not be there. As these are only like the third or fourth pair of socks I knit, I never really paid too much attention to this issue before. In the last couple of socks, I have set out to stop this chaos.
A good execution of the new "no hole" method I cooked up.
To begin with, I never understood why pattern directions would tell you to work the heel flap until you have (for example) 15 slipped stitches and then tell you to pick up the same number of stitches on each side. When I executed these instructions I would have already worked a setup row (or two or even three) and then had a couple of extra stitches on the side along with the number of slipped ones called for. I would wind up with baggy heels and about 18 stitches on each side, causing extra decreases and a looser sock.
What I tried this time was counting all heel stitches on the side, including those worked in the set up rows. When I had 15, I turned the heel. This gave me a shorter heel and a better fitting sock.
We now join our sock already in progress to illustrate just what it is I'm talking about.
These are your slipped stitches on the gusset, from the back:
And the front:
Once you've knitted your heel flap with the appropriate number of stitches slipped on the sides (not necessarily rows) in this case, 15, turn your heel of choice as usual. Knit across the last row and you'll be faced with this:
For this sock, there were 15 stitches to be picked up on each side. To tighten them up I twisted them as I picked them up and knit them, per Nancy Bush in her book, Knitting Vintage Socks.
A quick tutorial for twisting picked up stitches: Insert left needle into front leg of stitch:
Place right needle through the back loop
Knit off.
Easy peasy. You could of course just knit them off without twisting, or pick them up in whatever manner you are accustomed. Knitter's Choice, as Elizabeth Zimmermann says.
This is what they will look like as you work down the heel:
Purdy and tight without giving you stress and strain.
Now we are reaching the top part of the flap and what I call the "corner", the area between the knitted heel flap and the instep stitches held on other needles (either one circular or any number of DPN's, depending on your choice of poison). 
Notice the lowest strand between the two halves of the sock, the purple one:
This is the strand we are looking for. Not to knit into, like I once was told, but to knit next to. Study the first picture and the white V on the left the purple strand runs through, the knit stitch that the arrow covers in the second photo. This is what we are going to pick up and knit into, treating it like another slipped heel stitch and our number 15.
Another view of the strand:
Again, we will be knitting into the white knit stitch the purple strand runs through, treating the strand as if it were the normal ladder between two knit stitches.
The astute among you might realize that treating the two halves of the sock this way is basically the same as if it were a knitted row because we will be continuing to knit across the top of the sock on stitches that are right next to each other in the row. The even more involved might notice that if we were trying to line up the stitches as if they were in the same row, we should pick up the stitch below the one I am about to instruct you to. I did try that first and was not please with the results. If this paragraph confuses you, then ignore it and keep going. It's easy, I promise.
Take up your needles and prepare to knit into the stitch. Note how the white V lays in this photo:
Pick up the stitch using the left needle and twist by knitting through the back of the loop, as you have done in the previous 14 stitches.
You will be at the end of the heel flap and ready to knit across the instep of the sock with the stitches not worked with the heel.
Do so, working in your sock's pattern.
Something to note: IT IS OPTIMAL to twist the two "corner" stitches, even if you don't twist the others. This tightens them up and prevents the hole we are trying to avoid.
Now we are ready for corner #2.
This one will be a little bit tricky at first if you are using two circulars and like to keep the sole and picked up side stitches on the same needle like I do. I push all the stitches on the needle to one end so I can use the left needle to once again pick up the stitches and knit off onto the right needle. If you use DPN's I think you would start with a fresh needle. Of course, I have no experience with this, so don't quote me on it. The other option using two circulars is to use the needle that holds the instep stitches to pick up the second side. Do what is comfortable and makes sense to you.
Moving on. Examine your second "corner" carefully. This time we are looking for the green strand.
Here is another view. Again, we are looking for the green strand to find the stitch next to it because that is going to be the one we pick up.
Follow the green strand to the left, or up, and take note of the blue knit stitch the green strand runs through. This is our first stitch on the second side of the heel flap. Pick it up. If you have a hard time getting it with the left needle, use the right needle and then transfer it to the left before knitting and twisting it, as I've shown below.
Pick up with right needle:
Switch to left needle and knit into the back:
Knit the stitch off. Note it will be a little loose. This is okay, but make sure that you twisted this stitch and reknit it if you must.
Continue down the sock.
And that's it. You've reached the heel from the second side, which should look something like this:
And after a round of plain knit before you start your decreases, your picked up stitches will look like this:
Here is a shot of the first knitted "corner":
And this is the second "corner":
Resulting in this:
A sock sans unnecessary holes.
Questions or comments? You can reach me at fiberjinx AT yahoo DOT com.
He's confounded by it all. Meanwhile, I appear to be keeping myself well occupied in defense of the frio. I've started some projects, like Argosy.
I'm loving this scarf so far, and I'm also enamored by the idea of expanding this pattern into a blanket. Maybe it's just the cold weather, but visions of hats, mittens, and scarves have been dancing in my knitty head lately. As well as socks. Of course socks.
Pattern: "Madder" and "Oak" Ribbed Socks by Nancy Bush, in her book Knitting Vintage Socks
Dutch heel close-up:
And one of the points of a star toe:
It's no secret I'm a fan of green and purple, especially combined for sock yarn action. Thus it follows I'm a fan of green and purple socks. 
Pattern: Yarrow Ribbed Socks by Nancy Bush, in her book Knitting Vintage Socks
