whats wrong with the cape, and indeed much of the sprite, is that it's not really informed by its own needs.  I'm not a stickler for realistic anatomy, however i think that there's a lot of noodle shapes going on and the cape is sorta stuck on top without really considering how it would attach to or fall around the character.  The breastplate and boots likewise are just filling a space with a material color. 

there's a few things to think about with each of these pieces of equipment.  what si the shape of the breastplate? how does it move as he moves? where does it fasten?  how is he mobile, and how does it break away from the arms and traverse the neck+shoulders?  what is the shape of his leg armor, and how is it fastened?  what is the shape of the cape?  although it's a classic superhero cape, these have never been worn in real life.  there are many types ofcape and cloak that have been invented by people who actually would wear them.  little known fact - most capes have sleeves or at least holes to reach the arms through, because it's very hard to keep a straight cape out of your way.  see http://ecx.images-amazon.com/images/I/41mHaikyLnL._SL500_AA300_.jpg .  This is true for all capes and cloaks worn by crusading knights as well, which is where we generally get the medieval inspiration.  otherwise we wear a poncholike garment, which raises over the arms to allow for mobility.  other capelike garments for combat are things like the jackets worn by later cavalry troops - a full coat fastened by a cord or chain at the collar and hung loosely over one shoulder.  fighting in a superman cape would be nearly impossible.  when one does see a full cape or cloak without sleeves, such as those worn by religious figures, it is almost always ceremonial and kept outside of any practical role.

the sprite's body is quite quite nice, but i have to say the shape of the head is a complete letdown by comparisson.  I think it needs a real redrawing with the same style and care of the lower parts.

Also, you know this sprite is not isometric?  Those tiles will look strange with him; far better for them to be *much* compressed vertically or his stance taken from a much higher angle.

The tiles themselves, they are a bit noisy and feel like they're missing confidence in the texture.  Id suggest working them in light and shadow like your character's body rather than form and noise.

thanks! something like this for the elbow?

Yup

How's this then?

I don't think you solved anything.  The arms are still straight down which is making the hand hard to distinguish as well as making the wrist look broken.  They still taper the wrong way (towards the back) and do nothing to communicate "I am a pistol."

In general the character's impression is "i'm bored and uncomfortable."  It could be trying to communicate coolness, but it falls a bit flat - namely because there's no direction to the action and the pose is not 'slick' in any way.  I think he at least needs to point his arms at 45 forward or more.  The eye is also getting invaded by that extra piece of hair which gives him a pretty serious "I'm half-stoned on my anti-depressants" look.

Here's an edit trying to keep some of the character i see in this guy but starting to make him a character that you could see actually having a game about him worth playing :