Every repost is a repost of a repost. This is no exception, as I've suggested this idea before. TL;DR version is at the bottom.
Right now, cloth is not a very useful industry. At best, you can do the following:
1. Replace your dwarves' clothes every 5 years.
2. Make ropes and bags.
3. Sell cloth to merchants who are trying to sell you cloth.
Compare this to the wood, metal, stone, or glass industries, which let you make weapons, tools, traps, and furniture, which are the backbone of a functioning and furnished fortress, as well as valuable crafts. Granted, you can make cloth crafts, but it's effectively the same as selling the cloth, and you're more likely to grind your excess stone and must-go-somewhere bones into crafts.
Short of re-dressing your dwarves - which you rarely have to do, and aren't obligated to - cloth is entirely optional. What little you need (bags, rope) can either be imported or replaced with other industries (leather, metal).
So, the question arises; what is the simplest-to-code way to make cloth useful and/or necessary? Some ideas...
1. Bedsheets.
While the lack of bedsheets/matresses can be waved off with "dwarven toughness", it wouldn't be all too hard to implement them as a bonus to beds. Using the decoration system, a mattress and sheets (perhaps also pillows) can be used to improve a bed's quality, and some tangible bonus could be achieved from it - such as shorter sleep periods or faster wound recovery, to say nothing of the ubiquitous "happy thoughts". The bonuses for mattress/sheets/pillows would have to be averaged somehow such that ultra-beds take a bit of work.
2. Doormats
Not sure if/when this will be valid; if, with the upcoming version's contaminants, we have phenomena like muddy bootprints or trudged-in blood, a token doormat could stop these contaminants, or arbitrarily clean the boots/shoes. Would be relatively easy to code, though, I'd imagine.
3. Dressing
A token system for dwarves owning multiple sets of clothes.
a. Dwarf is now the proud owner of a fancy dresser. Huzzah!
b. Dwarf gets freebie clothes (as they do now), puts them into dresser.
c. After sleeping, dwarf goes to dresser and changes clothes.
d. When clothes reach their deteriorating point, they are not destroyed until the dwarf changes out of them, at which point they will seek new clothes.
e. While on break, Dwarves will wash their clothes arbitrarily at the dresser using a bucket of water. They wash one set, then change into it and wash the other.
4. Rope Ladders
Slated to go in next version, but again, can be accomplished with imported cloth.
5. Cleaning Rags, Bandages
Low-quality cloth scraps could be used for the Cleaning labor, or as part of health care. The latter could well be a way to make basic cloth production a necessity for a fortress.
Well, that's all for now. Here's the TL;DR version.
-Bedsheets to improve bed quality, reduce sleep/heal time
-Doormats to stop contaminant spread, if applicable
-Dwarves switch sets of clothes after sleeping, use dresser
-Rope ladders, likely to go in next version
-Rags/bandages for cleaning/health care/medicine
Any contributions/discussion welcome.