Yes you can cut felt with Cuttlebug!
Felt cuts great with the sizzix originals dies and the sizzix originals dies work in the cuttlebug. So Yes to cutting felt in the cuttlebug itself but no to cutting with the cuttlebug dies.
The reason I bought the cuttlebug was because I could use anybody's dies in it.
Here's a how to video http://www.youtube.com/watch?v=b9y6r...eature=related