Nothing wrong with a bit of corrosion on your best riding steed, if said steed happens to be entering it's 3rd eon of servitude :konrad:
As for the cape? It could work, I could see a lot of things working. But it really matters what you want the composition to look like in the end; With a cape I imagine it would be amazing if it were fluttering high, and very tattered, rather than at rest, which would make the back of the model almost bulky, but kinda air-y? It'd also depend on the unit you plan to house him with, since you won't want to make the models rank up funny, although I could use an easy unit filler being used to provide him a reliable "Space" behind him open for his model to spill over into (Where as forward you can't always know your opponents model will rank up with him in the front).
I really like capes personally, but there are other ideas you could go with, like a trophy-collection type thing, random heads/skulls hanging from his horse or back, or even a spike with impaled heads/body? Or you could leave the back area more bare and make the focal point more towards his weapon, since the Steed itself already is quite active back/low. So a high/front facing weapon could balance against that (Like a typical spear, but with more pizazz).
But then again, I wouldn't listen to anything I say, because honestly I have no idea what I am talking about!
