If it were an allergic reaction of the skin to the oil, then that reaction should also occur on other parts of the body -- most obviously on the fingers that come into contact with the oil when applying it to the scalp.
This is not the case. I can put as much castor oil on my hands as I like -- no reaction of any kind. If I put it on my scalp, I shed handfuls. It's more complicated than that.
(Also, I'm really not understanding how the act of dissolving sebum is supposed to cause hair to come out that's ready to shed in its natural cycle. Surely a bit of sebum can't glue a waist-length or hip-length hair in place strongly enough to resist combing? )
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