Does anyone have experience with insulating with waste-wool from shearing?
As for sheep's wool it is a great insulating product.  I actually ran into 50 rolls at a local Habitat store that had them going for $4 a piece.  So I bought them all.  They were non-faced rolls and have to be one of the most pleasant insulation experiences of my life.  

However you have two problems and neither of them have to do with cleaning.  First you must be able to compress the wool so that it stays together and its density is appropriate.  I found that it was a lot like rockwool except not itchy.  Second the burlap bags are probably a no-no because you would have to prove out their fireproof qualities.  

I would talk to local inspector on both.  Sure he will be happy with wool but may express his own concerns on top of mine.

And just an FYI.  I have no idea where I would order these wool rolls.  I have never seen them at any store so obviously someone ordered them special and decided not to use them and gave them to the Habitat store.  Also you may want to visit some wool insulation company sites for tips.  I don't know what if anything they use to get the wool in firm strips.