Yes, the polyfill is dangerous. My squirrel got it wrapped around one of her legs, which became swollen and purple after she tried to chew it off, and could not.

For this and for reasons of not wanting polyfill or other unnatural fibers to get into their digestive tracts, I use cotton batting. It's cheap, and a little goes a long way.

But it seems to me that this natural alpaca hair could be awesome nesting material for them. It won't get stringy, and it is soft. They also won't eat it.

https://www.amazon.com/gp/product/B00F8MRLBG/ref=ppx_yo_dt_b_asin_title_o06_s01?ie=UTF8&th=1