I don't really understand why there's a problem with flowing cloth physics to add capes. Take a look at the camel mounts sometime. I have two of them, and they both have a draping blanket with tassels that hangs loosely to either side of the camel, and both the cloth and the tassels have a flowing and swinging movement that goes with the camel's movement. That's pretty much a cape right there already in the game.