Hi Linda, The cloth was 'Shalloon', used for blankets and apparently also for linings for army uniforms at the time of Marlborough, when a warm lining was needed, because a soldier slept where he finished the day. Any surname derivation book supports that theory.
Another, more sexy version is that a Welsh landowner captured a French knight and took land around Chalons in lieu of ransome. Supported to some extent by 'Chester Genealogies', John Reynolds 1739. He starts with 'Maelawg Crwm, Lord of Llechwedd Issa, and Nant Conwy, and one of the fifteen Tribes of North Wales', and four generations later appears 'Madog Crwm de Chaloner in France', and from then on it becomes a surname.
The story goes that Madog's grandfather took the land, put his son in to look after it and Madog grew up there then returned to Wales. As the name is still more common in N Wales and Cheshire than anywhere else, and may predate the Huguenots, it has something to recommend it. More worrying is that Crwm means 'bent' or 'bowed' and although it only appears with these two, I'm not sure I want to be identified with them - were they bent or were they bowed?