How to create hairs that hides the body (see example)

Would possibly be better to make this into a full-body costume you make sure is assigned to the head (not sure if you'll have to do some of it manually because of the tentacles?), hide the head (neck and up) inside the "head" part of the tentackled creature, and give the sim a bald hairstyle. That way you hide everything that needs to be hidden, and in theory nothing should pop out.

You may have to move the creature up a little, so it hides the head properly.

You could even try to make two of the tentacles line up with the arms, and assign them so they move a bit (but this could get a bit tricky and might not look good, so some testing might be required - maybe keep it to shoulders/clavicles only?)

You may also need invisible shoes/feet.