I tried my hand at this, but was only able to generate a Sinister Tundra rather than the proper "Terrifying". I also wussed out and brought an Anvil with me, but with the lack of available fuel I don't think it will make much of a difference.
I tested to make sure it was a reanimating biome by slaughtering a Water Buffalo Bull. I tanned its hide real quick since zombie skins seem to be really bad news. The Hair, although scary, was less dangerous, and in two reanimation showdowns, it was put down by my militia and torn into many pieces. Interestingly, "Water Buffalo Nose hair" can be spun into a full unit of thread, so I was able to get 7 units of thread out of this. One dwarf who got punched in the face by the Water Buffalo Hair was apparently rather traumatized by it and is Unhappy. "Attacked by the dead recently" is a pretty nasty happiness hit to take before I've even had a chance to make beds.
I also found that it's super-easy to dig through an aquifer in a freezing biome, although Ice and Stairs seem not to agree with each other. Up/Down stairs dug into aquifer-sand make it no longer aquiferrous, and a ring of ice around it keeps it sealed and safe. My aquifer was only one layer thick, but I think that by continually channeling around the perimeter of your stairwell-to-be to remove the sky-blocking floor, you can ensure a frozen cofferdam to any depth required. I think. Needs testing.
The important thing is to NOT channel out the center tile, 'cause a staircase through ice = nothing.
As for Adrakon's amazing mushroom find, perhaps there's something special about Peat? Did you notice anything growing on other soils, or just the peat? This is a valuable thing to know!