I did a little research on felt. Here is and excerp of what I found on wikipiedia...
"It is also possible to produce artificial felts. If made using the wet method, an artificial felt will contain a minimum of 30% wool fibres with the rest being artificial fibres. This is the minimum composition necessary to hold a fabric together with the fibres alone; it would be difficult to form a stable fabric by hand below this ratio. Wholly artificial felts are actually needle-felts.
An alternative felting process involves a steam roller rolling over the unwoven fibres in a shallow pool of water with the cloth rotating as the steam roller passes over it. This method is widely used in small towns in India where mass manufacturing of clothing is performed."
A statistic From drinkingwaterforindia.org: 4,000 chidren will die today from lack of clean water
The are three things that worry me: Wool is a protein fiber, it needs oils to remain in it's current state. It's oiled prior to being worked and I would hypothesize that it would become brittle in gaseous alcohol making a delicate gasket in the conditions used for distilling.
The next thing is that the water used to make this stuff is in India and China alot of the time, I wouldn't drink it, so I wouldn't use something made in it for something I am going to drink. The final thing is that my search for "food grade felt" turned up alot of carbon fiber felt that first, is not wool, and second Would probably tase really bad if you got it hot in alcohol vapor.
Since I have had to re-build a complete setup since I found this site I have started doing alot of research trying to find what will defenitly work and what may not. Surely there is a schematic that will overcome your gasket issue. If not post some pics of the problem maybe someone can help out.