I was just about to post that eating cotton can be harmful, just as you mentioned. It can block your intestines and the only way to correct it is surgery, including the possibility of losing part of your guts.
Many years ago, 1998, we had a German Shepherd, 9 months at the time who got really sick. His symptoms were he wasn't having regular BM's (only very liquidy ones, and nasty smelling), he only ate small amounts of food, was vomiting and was also very lethargic.
We took him to our vet. He had a blockage and required emergency surgery. The vet was a very good friend of ours so we were invited into the OR during surgery. He removed the part of his intestines where the blockage was located.
Our vet found what resembled stuffing from the inside of a stuffed dog toy. It was hard to tell due to discoloration etc. When we got home we searched his kennel and found what was left of a stuffed toy under the mat in the kennel. He ate most of the stuffing.
He recovered fine, but let me tell you, trying to keep a 9 month old GSD from being active for about a month was difficult. We managed, thankfully. He lived to be 12.
Never again did we
buy stuffed toys for any of our animals.
ETA: Watching our vet putting, or reinstalling, all his intestines back inside his body cavity was, ummm, very interesting.