I don't see why fabric strips wouldn't work, great idea
! And since it won't be your horse's own hair or coat and skin, maybe you could really get the fake tail soaked in fly repellent to give it extra "swat"!
If your horse will eat it, I have also heard that feeding garlic powder (I've seen "official" horse garlic supplement) will make them less appetizing to flies, but I've never tried it myself. As a matter of personal preference, I would rather feed a garlic powder than a "chemical" supplement designed to repel flies, but that's just me. My sis's QH would slurp the garlic, I have no doubt, but my boy's pickier.