lol I seen that once in the fishing guild but the guy wearing it didnt seem to see it, maybe you can try playing at a different detail and see if it helps
Go into C:\WINDOWS\ and delete .jagex_cache_32 folder. This will automatically be redownloaded when you start up the game client again, that should reset any graphical bugs.
Are you crazy? Why would you want to fix such a thing? It's a new cape, the Wood finish CAPE!!!!!
Try alot of things that involve dropping it, Drop it then pick it up, got a house with a cape holder? put it in there and then take it out... etc