It's unlikely the shellacked cotton is the source, but I've been surprised before.

Much more likely it's metal to metal contact in the stem/handlebar/steer tube area. Every place metal contacts metal should be greased.

Take apart and grease the stem bolt that clamps the handlebar, both the threads and where it is seated. Grease the handlebar where the stem clamps it. Pull the stem and grease the main stem bolt threads, nut end, wedge and the actual stem shaft. Reassemble to proper torques. I bet no more creak.