That's so strange.
The fungus would make a lot of sense judging by his surroundings when I found him.I heard back from the herpetologist. He actually conferred with another expert he knew and the two answers I have back so far are parasitic fungus or "urticating hair from a stinging caterpillar thrashing as it is being eaten." I am still waiting to hear from the biologist.
I didn’t touch it in fear of causing harm to the toad. Although it did seem to be coming out of the skin in some way or another. At first I thought it could be some sort of mold, as it was in a deep pile of soggy dead leaves.The herpatologists also just suggested hair from a dead mammal that attracted flies which in turn attracted the toad. This may be an obvious question but did you try to brush the hair off? Do you know it's attached?