I don't think there was anything to say that the cocooning material, itself, was doing that. In fact, I think that in one version of that deleted scene (or at least, an early script draft), she asks Dallas what the Alien, itself, has done, which provokes some kind of emotional reaction from him, inferring he underwent some kind of violating invasion. And in the novelisation, based on the script, Alan Dean Foster writes of Ripley's thoughts going back to a comment Ash makes, in regards to parasitical wasps impregnating spiders (which I'd imagine would have been based on notes which were passed to him when he was writing the novel).
So, I don't think there was ever even behind-the-scenes intention of implying the cocoon material was doing anything but holding Dallas and Brett in place. It was something the Alien did which was meant to have begun the mutation process.
Also, in concept art, Giger (and, I think, O'Bannon) has the nest material more along the lines of silk, with Dallas and Brett undergoing the change into eggs, which further implies that it wasn't the material which was causing it. Later on, its general appearance changed to look more like what we know of today.