In 1666 an Act of Parliament was passed for “burying in woollen only,” which was intended for “the encouragement of the woollen manufactures of the kingdom, and prevention of the exportation of money for the buying and importing of linen.” Repealed in 1814.
`Odious! in woollen I`twould a saint provoke;' (Wefe the last words that poor Narcissa spoke). `No! let a charming chintz and Brussels lace Wrap my cold limbs, and shade my lifeless face. One would not, sure, be frightful when one's dead; And - Betty - give the cheeks a little red.'
This was the ruling passion strong in death. At the time this was written it was compulsory to bury in woollen. Narcissa did not dread death half so much as being obliged to wear flannel instead of her fine mantles. Narcissa was Mrs. Oldfield, the actress, who died 1731.
Source: Dictionary of Phrase and Fable, E. Cobham Brewer, 1894
More on Woolen from Infoplease: