Not sure if you’re still working on this, but I’ll make a few comments.
This actually does look pretty good (and the teddy-bear itself is pretty cute!), only the texture for the teddy-bear fabric could be a bit more realistic.
I guess I haven’t done wool string before…(see below)
For fabric, take a look at the way that it is done in (the well-know) splash-screen for the Spring film (link to file below). Sometimes it can help to look at how others have done it to get an idea of how to do it yourself.
I have also just realized that the latest blender releases (esp. 2.91) now have a lot of updates and fancier features for sculpting and cloth sim than when I last did cloth sim. (It’s hard to keep up with blender these days!)