A novel model for light propagation in elliptical-hole photonic crystal fibers (PCF) is developed with localized orthogonal function method. The dielectric constant of the PCF missing the central air hole is considered as the sum of two different periodic dielectric structures of virtual perfect photonic crystals, and the electric field is decomposed using the localized Hermite-Gaussian functions. From the wave equations and the orthonormality of Hermite- Gaussian functions, the propagation characteristics of the PCF, such as the mode field distribution, the effective area, the birefringence, and the dispersion properties are obtained. The birefringence and group velocity walkoff parameters of elliptical-hole PCF are analyzed with this model. It is shown that the birefringence and group velocity walkoff parameters are typically stronger than that of the conventional fibers for comparable parameters, and exhibit frequency dependence quite unlike conventional birefringence systems. Moreover the unusual combination of strong birefringence with zero group velocity walkoff can be obtained, which may allow the novel nonlinear applications.