This is a way way late addition to the party but I came across this thread and thought that this might help anyone else who happens on it.
I've done a bit of research in this area, and it really doesn't matter what state the textiles are in - as long as they are not wet or mouldy.
According to a London recycler, http://www.lmb.co.uk/recycle.html, torn and stained textiles get turned into things like cleaning rags, I've also read somewhere that they get turned into mattress filling and car insulation, all sorts!
Anyway hope that helps anyone else who stumbles on this... Ultimately all these organisations want to avoid the textiles going into a landfill site.