I might not have been clear.

I am using the low poly cloak as a cloth and colliding that with a low-poly body. I am not trying to apply a deformer TO the cloth but rather use the cloth AS a wrap deformer for a SubD so that I can have seemingly hi-res cloth without having to simulate a dense mesh.

I know it supposedly works because a lot of people on.. uh, that other site talk about it.

Actually, I have tested it out colliding a simple poly cloth plane with a poly sphere and having the plane wrap a copy of itself which is converted to subD, and it worked perfectly.

UPDATE: I have tried importing the file into another scene and simulating, creating the subD in another scene and importing it into this one. I have tried making the cloak a wrap deformer for a subD copy of itself and several other objects. It seems that this cloak is for some reason incapable of being a wrap deformer, and that the problem is not with cloth.

Thanks for the reply!