This sounds really cool! I'm quite ignorant of the space, so can't speak to the existence of such a thing. Also curious about the practicality of "dethreading" clothes. Would also be interested in this.
What you can make that way is "nonwoven textiles". That's what you get when you run chopped up cloth through a paper machine. Paper money is the classic nonwoven textile. Hospital gowns and such can be made that way. Roof insulation. Floor insulation. Auto seat insulation. Basically, filler materials.