I made this Runecloth guide to help out players who want to farm the cloths instead of buying them from the Auction House. I decided to search for places with a high density of mobs that I could kill and drop 
Runecloth. I traveled around Azeroth, and after a while I made a list of places.
There were no major changes to Runecloth drop rates, so this guide can be used for Cataclysm Classic and Retail WoW.
Runecloth
Blackrock Depths in Searing Gorge
If you don't have a high-level character, scroll down to the bottom of the guide to find alternative farming places.
Blackrock Depths is currently the best place to farm Runecloth. One clear takes about 6-7 minutes, so you might hit the 10 instance/hour limit if you clear it too fast.
Blackrock Mountain in Searing Gorge
To get to Blackrock Depths, enter Blackrock Mountain from Searing Gorge or northwest Burning Steppes.
Blackrock Depths Entrance inside Blackrock Mountain
Once you are inside, fly down to this cave entrance. Bear left in the cave and the instance is at the end of the chamber.
Blackrock Depths Dungeon Map
After you cleared the instance, go outside and reset it by right-clicking over your portrait then click the "Reset all instance" button. This restarts the whole instance and all mobs will be back.
Silithus
Killing Twilight Cultists in Silithus is also a good place to farm. It seems if you farm at the Twilight Base camp, you will never run out of mobs, because the respawn is really fast. But if you do run out of mobs just go to Twilight Post and move between these two camps.
IMPORTANT! Silithus will be phased after completing/accepting certain quests, and most of these mobs will not be there. But, if you talk to Zidormi, she will allow you to switch between phased/low-level and Legion/high-level versions of the Silithus. (if you open the map, she will be marked with a white text bubble at northeast)
Blasted Lands
Another great place is farming Drowned Gilnean Merchant and other humanoids at Blasted Lands.
IMPORTANT! Blasted Lands will be phased in a different state after completing/accepting certain quests, and most of these mobs will not be there. But, if you talk to Zidormi, she will allow you to switch between phased/low-level and high-level versions of the Blasted Lands. (if you open the map, she will be marked with a white text bubble at north)
Visit my Netherweave Cloth farming page when you have enough Runecloth.