I just noticed this thread. Check out this site
http://www.carlsondesign.com/#Plotter_Cutters
Not only is it a fabric cutter, but a pretty cool CNC machine.
It looks like he uses some sort of swivel knife similar to what sign makers have for cutting vinyl.
Here's a link to a guy who has developed a cutter and shows you how to do it.
http://www.cuttingedgecnc.com/vinyl.htm
T