You two are fighting like grade schoolers. Breath in and out a few times before you post again. Adults keep cool when they're disagreeing with someone, children do not. You aren't children.
Now, Cloud doesn't wear the sheath in every scene during Advent Children.
Sheath On:
Sheath Off:
Nor does he wear it in Kingdom Hearts.
So iconic or not, there is precedent for the outfit appearing without a sheath so its not unreasonable to want it. That said, it would mean work and resources to create a 2nd, augmented version, of the vest. Resources SE might choose to spend elsewhere.