This article is from the rec.arts.movies.past-films FAQ, by Evelyn C. Leeper evelynleeper@geocities.com with numerous contributions by others.
No. This is an urban myth which circulates widely and often turns up
on the past-films newsgroup. Sometimes a number of circumstantial
details are added to the story, depending on how big a liar you heard
it from. In the scene in question (where Dorothy and her friends are
in the forest) one can see an object hanging from one of the background
trees, but careful examination reveals it to be a large bird. It is
said that this bird had escaped from some other part of the soundstage,
and was hanging from a branch of the "tree" by its feet.
 
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