My grandmother used to have blankets that used wool for batting. I think you can actually still buy wool batting. I see compressability as a problem. How large a stuff sack would a 0F wool bag take? The wool batting does not make a lot of sense now that there are much lighter synthetic batting materials that work well in wet conditions. I would reserve wool for underware. As underware, it really works well, in conjunction with a synthetic bag, if you are in VERY wet humid condtions.
There were a few wool bags, quilts and such around when I was growing up as well. Compressability and weight were certainly issues. I wouldn't want to pack one anywhere. There are certainly much better options for sleeping bags today. I too really like the merino underwear but also still keep a few wool shirts and sweaters for the trail. (Maybe I'm still a little old school.) Merino wool underwear with a synthetic bag is indeed a great combo for damp conditions.