From what I understand, SE was waiting to implement capes to allow for a more physics-focused approach than just set animations. Sadly, releasing the game on ps3 killed this idea due to its inferior processing power.

It seems the cape on Odin's armor still exists, just isn't being drawn. If you mouse over the area behind a character with the set on, you can see the click-box is slightly larger due to some invisible back-piece of gear (at least this was true through 2.1, no idea if it was changed since then)