For me I think that I would pose him then take some pics of yourself/others in a similar position, then model the clothes from there, that way you know how the clothes are meant to look, rarther than leaning on blend shapes and painted weights etc..
If your going to go for cloth then Kurts tutorial might help you but no too sure as it can be very messey unless you get the settings right.
I think modeling clothes after posing will give twice more work then modeling them on T pose. And will be more difficult for you to determine how they will behave. If it was my model, I would model the clothes making my model live, making some curves on top of it, where natural seams on clothes go and using loft/boundary to generate some nurbs surfaces, making the clothes geometry.
After rigging and posing, I would use the sculpt geometry tool to make folds more naturaly, and when I got the results I wanted, I'd convert those nurbs to polygons, getting the final clothes.
I don't know if you like the idea, but I think doing clothes is much easier using nurbs than polys. Maybe this idea could be used as inspiration for something different, though
Not sure if jramauri's idea would be allowed with the challenge rules in mind - it has to be all one mesh doesn't it for it to qualify? Looks like you're gonna need to do some serious extracting / merging
Great progress arran! Love the new body topology. I didn't have a problem with previous topology, but the new one looks really great. Love the detail on the stick. Must have tooken a while to carve in those details. Finially, are you going to give him the robe that the concept pic sports?