I did some more research into this yesterday, and still am not convinced that people sleeping over a rope was a thing.
There are a large number of sites repeating the exact same story / wording - complete with the rope cutting and often with the photo from a film I mentioned in my previous post. This has the feeling of an urban legend about it.
There is one other photo that pops up [0] is variously captioned as being in the US or in Germany in the 1930s. At most this picture shows people sitting down, leaning against a rope - not hanging over it. This is akin to what George Orwell described (someone describing to him) - not people hanging over a rope.
The other quote occasionally given in reference to it is from Dickens, which if you read it describes a hammock type system.
I cannot find any other sources, but there is a lot of noise (including wikipedia edits) from last year when it was doing the rounds. I found this forum discussing it in 2008 [1] where one person claimed to try sleeping over a rope and found it impossible to do so.
[0] https://forum.casebook.org/filedata/fetch?id=656729&d=123915...
[1] https://forum.casebook.org/forum/ripper-discussions/scene-of...