Well after a long debate with...well, myself, I decided to throw this in the mix. So, here goes:

Shadow Cloak is not a very good disengage and unfortunately is very much a signature ability if the Nightblade class. The problem with it is it's not reliable in PvP and only useful for exploiting terrible AI programming in PvE. It breaks if you have a DoT active on a target, if you have a DoT active on yourself, if you take direct damage, if you deal direct damage, and is countered by potions of detection as well as Mage Light. Clearly the Dev's have been traumatized by stealth classes in other games and have ensured it's heavily countered in ESO. Fair enough, I played GW2 too.

That said, the Nightblade suffers greatly to the counterplay proliferation in the game particularity due to invisibility being in most cases vastly worse than regular old stealth. It grants no stealth attack bonuses, costs large amounts of magicka to use, is sternly limited in duration, and restricts speed just as standard stealth does. But what if it was functionally different than it is presently by becoming a toggle ability?

To retain balance let's say Shadow Cloak only breaks under the condition of direct damage dealt (attacking). DoT effects on the Nightblade or their DoT effects on enemies do not break it, nor does direct damage received. Instead while toggled Shadow Cloak consumes 13% magicka per second active at Rank 1 (Rank 4 is 10%) and Direct Damage received while using Shadow Cloak effects health normally. However, instead of breaking the effect it is consumes 10% of magicka in addition to sustaining the effect while toggled. Why % based? Simple. This limits the duration it can be used to a relative cap, and allows the Nightblade to spec heavily into Stamina without being heavily punished for that stealth play-style which the class is intended to satisfy.

Furthermore all things that trigger under stealth would apply to Shadow Cloak. Stealth attack bonuses however wouldn't be practical to balance (just see every Nightblade toggling on Cloak, attacking, toggling Cloak, attacking, over and over again. No bueno.) so they would still not be included in the skill. Though Shadow Cloak would no longer be reliant on the stealth crouching animation nor the reduced speed that comes with it (seriously bro, you're invisible. Why are you crouching? It's not making you any harder to see...) thus providing the ability to control engagement and disengagement at full speed which is the entire point of rolling a speedy stealthy class.

Counter play however would still need to exist, so potions of detection and Mage Light would continue to turn off the effect, but instead of a lack of indication that this is the reason you are detected, the ability itself will be desaturated (grayed out but still able to be activated) while in the range of those active effects. Now we won't have NB's spamming the key, draining their magicka, presuming it's bugged (something NB's are familiar with), not really know why the *** it's not working (again). They'll now know they need to GTFO if they want to go invisible again.

As for the Dark Cloak morph it would remove 1 DoT effect every second and restore 5% health if a DoT effect is removed (8% at Rank 4).

As for the Shadowy Disguise morph it would be functionally changed to trigger a 15% miss chance on all incoming attacks for 10 seconds (16 seconds at Rank 4) when you exit invisibility. This creates synergy with the class skill Blur/Mirage/Double Take, with the stereotypical medium armor Nightblade using Evasion/Elude/Shuffle, and the industry standard Dual Wielding assassin using Sparks/Ember Explosion.

Any mechanics that I miss? Would I inadvertently supercharge NB's into OP with a build option I missed? Did I just Nerf them into the floor? I would say feel free to be brutally honest, since I don't personally mind exceptionally harsh criticism, but forum admins being as they are let's be relatively civil for their sake, shall we?