The gemara says in Sanhedrin [112a]:
בעי רב יוסף שיער נשים צדקניות מהו אמר רבא הא דרשעיות אסור (דברים יג, יז) תקבץ ושרפת כתיב מי שאינו מחוסר אלא קביצה ושריפה יצא זה שמחוסר תלישה וקביצה ושריפה
Rav Yosef raises a dilemma: What is the status of the hair of pious women in the idolatrous city; must it be destroyed? Rava says: Is that to say that the hair of wicked women is forbidden and must be destroyed? “And you shall gather…and you shall burn” (Deuteronomy 13:17), is written, and it is derived: An item that is lacking, i.e., that requires only gathering and burning must be destroyed, excluding this hair, which is lacking detaching, gathering, and burning. Therefore, even the hair of a wicked woman is not forbidden.
אלא אמר רבא בפיאה נכרית היכי דמי אי דמחובר בגופה כגופה דמיא לא צריכא דתלי בסיבטא כנכסי צדיקים שבתוכה דמי ואבד או דלמא כיון דעיילא ונפקא כלבושה דמי תיקו:
Rather, Rava says: This dilemma is raised with regard to a wig. The Gemara asks: What are the circumstances? If the wig is attached to her body, its status is like that of her body. The Gemara answers: No, this dilemma is necessary only in a case where the wig is hanging on a peg. Is its status like that of the property of the righteous inside the city and therefore it is destroyed, or perhaps, since she enters and exits with the wig, its status is like that of a garment, and it is not destroyed? This dilemma shall stand unresolved.
The Tzadikim who live in the עיר נדחת are not killed but their property is destroyed. What about their clothing? Do they need to exit the עיר נדחת naked??
It seems from the gemara that their clothing is NOT burned because the gemara says that if the wig is has the status of clothing, it is not burned. However, Rashi in Erchin [7b ד"ה שיער] avers [whatever that means] that their clothing IS burned [even though in Sanhedrin he doesn't say that]. He says that they must leave the עיר נדחת naked. How is he going to explain the language of the gemara here?
Another point - Rashi [here in Sanhedrin] explains that since clothing is like one's body, it is not burned. If that is true then how can we derive benefit from the wig of a woman who died - since it is like a garment which is like her body, it would be considered deriving benefit from a corpse??
Rav Avraham Genechovski said that we have to make a distinction between a corpse and an Ir Nidachas.