You wrap that orc-rag close round you, and put the belt outside it. Then this (the elven cloak) can go over all
Later on they are spotted by an orc company, sitting at the side of the road trying to be inconspicuous but I would have thought an elven cloak would look and smell wrong to the orcs. I don't recall that Frodo took the cloak off and later on Sam uses it for the two of them to hide under. Why did Frodo wear the cloak over his orc-rags? Wouldn't it have been safer to wear it under the orc-rags? And why didn't the orcs see the cloak for what it was?