Wool Cloth is actually pretty valuable on some servers, but farming a stack of 200 only takes around 10 minutes with this method. What you need to do is to run Stockades in the middle of Stormwind. For Alliance it's extremely easy to get there, just use a portal, and you are only 20 seconds away.
Just run along the instance, stick your head into each side room to pull all the mobs, and after you pull the boss which is straight ahead, go to the west corridor towards Hogger. Pull all of his mobs as well, and aoe them all down once they are all in the same room. This will get you 40 - 80 Wool Cloth each time, along with some Linen Cloth and some Silk Cloth.
Once you've killed and looted all of these, run out of the instance and reset it. You can reset it five times per hour, and get around 300 Wool Cloth each 5 times. Also, don't bother with the eastern wing, it does not drop any cloth at all.