Yep. Mountains may have starting grass, but it never regrows. Oceans have no grass and no regrowth (but the actual ocean biome is only the part underwater and the narrow strip of beach). All other biomes that i know of will grow new grass on exposed soil, including tundras, badlands and deserts.
For mass production of clothes, plants are the only decent option apart from bulk-imported leather: yarn just can't provide a decent supply, you can only shear adult animals, only once per year each, and each shearing harvest produces a single thread/bolt of cloth. A single farm tile of pig tail can easily generate 15 bolts of cloth per year, about 40 are possible with high skill and rope reeds; two such tiles can produce more cloth per year than a maximum-size herd of sheep.
If you drafted the imprisoned dwarfs to the military, you could issue them all a standard uniform of leather boots (high or low), leather armour and bone greaves/leggings, covering all the required body parts with non-rottable equipment.
With enough skill in the relevant labours, dwarfs can support rather large numbers of dependants; my quasi-hermitish game had a dwarf handle all the needs of herself and five children living with her, i.e. housing, clothing, food and drink. And she started with no skill in any relevant job. With division of labour and skilled workers, much higher ratios should be possible.
I'd recommend disabling artefacts in d_init.txt or severely limiting mining operations to keep the artefact limit low.