I remember reading this story in The New York Times when it ran in 1996.
The lead sentence: "A battery-operated Cabbage Patch doll that can chew had to be taken apart piece by piece this week when it munched a 7-year-old girl's hair up to her scalp and would not let go."
I just found out the family of another kid attacked by a Cabbage Patch Doll, this time in 1998. The father said it took "20 minutes and 20 screws and a sharp knife" to remove the doll from her daughter's scalp. According to the news report, "Mattel says they've had fewer than 10 reported incidents."