The cape is only as useful as about every other move. Used right its a good move. Used wrong and its usefulness goes poof.
Most important thing about using the cape is being unpredictable with it. If you ALWAYS use it, people expect it and start doing things to avoid being screwed by it like using Up-Bs to recover in reverse or straight up. Also will use B-airs instead of F-air so you're hit when you turn them around.
Be unpredictable, and it can be an evil tool instead of just a minor hindrance.
You do realize that if someone like squirtle or Marth Up-B the other way while Mario fakes a cape they're dead right?
That's a 50-50 chance instakill.
If I predict Mario's cape with an reverse Up-B, I hit him with a dolphin slash, probably do 13% damage or something, If I fail on my prediction and Mario doesn't cape I die.
"Every other move" doesn't have that massive of a killing potential.