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Also, if you go only with dyed thread/cloth, you may end up in a situation where you have all the cloth you need, but no bags to mill the dye into, so no dye, so no dyed cloth, so no bags.
It does raise the value of cloth, and clothing made from it, which makes your dorfs happier - though again, masterwork undyed clothes will still do so.
Early on, I wouldn't bother.
One thread = one cloth.
That way cloth is made all the time, it's then dyed when they have dyes, and everyone's happy.
dyed CLOTH has a bonus value modifier that correlates to how good of a job your dwarves did dying it (finely dyed, masterfully dyed etc.)
Dyed THREAD does not.