Here's a promising solution: the Hyperfabric project (via the fascinating ramblings at SteamSHIFT). This stuff is strong (it can support body weight), and lets you actually touch, squeeze, grab, and otherwise manipulate a large-scale fabric surface to control computer-generated imagery. It's certainly workable as a musical instrument, if you want to be able to, in their words, "press your face into the hyperfabric to release fairies."
I have no idea how this thing works, though I'm guessing some kind of correlation of pressure with video sensing. It's commercially available, or you can just ponder what giant spiderweb-like surfaces might someday do for music..