Never knew that about the crushed walnut shells... cool!
I've always used fully dried and cured sawdust for my pincushion projects. It adds a nice weight to the pincushion and doesn't seem to cause any dulling or rusting of pins and needles.
I got a big box from a woodworker and it has lasted for years. If you do this, just be sure the sawdust is NOT from pressure treated lumber, as that contains trace levels of toxic substances.