Hi! I do not know exactly what that fuzzy stuff is, but I have had it appear for many years and I have tried not only to ID it (unsuccessful still!), but also to find an appropriate fungicide to kill it with (still unsuccessful). It seems to appear from my peat moss frequently. I can tell it comes from the peat because I've had it appear in small, sealed yogurt cups which I use to start seeds. Everything but the peat was heavily sterilized beforehand. I also get it at home and in my greenhouses at work, almost exclusively in peaty CP mixes.
The best guess I have is Pythium. Banrot and Subdue MAXX should work on it if so, but I just haven't gotten around to testing them yet. The photo below is incredibly similar-looking:
http://www.eternallygreen.com/wp-content/uploads/2011/03/pythium-blight.jpg
Also, a less sure guess of mine is something called "snow mold." It seems to be more common in more northerly climates than mine, so I am guessing that perhaps in bogs it's quite common. I've never seen it occurring natively in Georgia--always comes out of peat moss. Most of the stuff I use is collected from Canada, the midwest, etc.
Things I can definitely say about "the plague":
-Most effective I have found is simply scraping it off. It's very fibrous and if you get some tweezers or a stick, you can wind it around itself very effectively, almost like string. It does not pull up the soil and if you're careful, it will not pull up anything but small seedlings.
-Absolutely not an insect, coccoon, caterpillar production, spider, or anything. It's either a fungus or maybe nematodes. In my CP greenhouse over the past 4 years, I have used almost 30 different insecticides and miticides on a rotating basis (I'm not chemical-happy by any means--I can speak firsthand that pest resistance is something to be feared and makes your life miserable). Anything that is an insect or arachnid will have been eradicated by this. I have also never seen anything living on, under, or near the white fuzz.
-Other than growing over your plants, it does not seem to actually
infect or
harm CPs directly. It seems to mainly be a decomposer of the peat IMO. I really hate it since it outgrows your stuff and just looks downright ugly.
-This is too labor-intensive for me but I imagine you can sterilize your peat before planting with either a microwave or boiling water. I grow too many plants to bother with this so I'm trialing different fungicides. And there's always a complete repotting.