In essence, I am curious if there is a way to get wool from sheep in a similar fashion as monster drops from a mob grinder. I tried making them funnel into a lava trap but that just killed the sheep and didn't supply me with any wool. Has anyone gotten a method working for this?
Using the dispenser is interesting and would work but snowballs is not a very realistic ammo source without hacks. I think probably the best method would be to have an area you go to out in the boonies during the night and there is no light in any nearby chunks. Create a pasture area fenced in and well lit, this will force passive mobs to spawn there. Run around all night kill all critters but punch the sheep first to take their wool.
I play with Mo Creatures, and if you have it toggled to anything but peaceful, the Bears Lions and Wolves attack the sheep. If you toggle off "Destroy drops", you could set up a traditional Mob trap, but with a bear in it. They won't attack you, so you can hop down and collect when you like.
This problem has been driving me bananas for ages.
Etho was able to make a mob sorter. With that in mind it could be interesting to make something that would seperate skeletons from the rest and then let the skeletons shoot the other mobs while using yourself as bait. That should shear sheep and produce music records.