The sheepskin pads are used as polishing pads. They were ( and still are to some detailers) the choice for the final polishing via rotary. Then came along foam pads and the sheepskin pads faded from popularity some. One or two sites, I think Autoint and DetailPlus still carry them though. Also to the best of my knowledge, they only come in 8" diameter.
The wool pads we are more familiar with used for cutting via rotary I believe are called "electrified wool", much different from sheepskin. These come in several sizes and need to be following with a polishing pad to remove their own micro marring.
Microfiber towels, with the exception of cellulose DF Towels generally contain some amount of polyester. It's all in the milling process that determines the quality/any hazard to the paint.
You can't go wrong with the MFs sold by the vendors listed here.