This is a fairly new phenominom in our school - covering classroom doors with fabric. I've seen it done with paper but there are several teachers who are doing it this year with fabric and hot glue.
I am not sure how it will stand up during the year, probably better then paper though. I would definitely caution against the use of excessive patterned fabric. I find the letters that Mrs. Peterson used made it difficult to see against the competting pattern of the door and border fabric.