The Collaborative International Dictionary of English v.0.48:

Crewel \Crew"el\ (kr[udd]"[e^]l), n. [Perh. for clewel, dim. of
   clew a ball of thread; or cf. D. krul curl, E. curl.
   [root]26.]
   Worsted yarn,, slackly twisted, used for embroidery.
   [1913 Webster]