Apparently, the cloak is on one of the cards for the "upcoming" card game:
Which is seriously stupid. People shouldn't be required to keep tabs on a non-existent game to understand what's going on in the story. But clearly, Hunt needed a cloak to make Fumbles look like a superhero, complete with exaggerated manly chest and a cape fluttering behind him, and the "be in constant pain" cloak didn't cut it, so he just added that one into the story at an arbitrary moment.
I was going back to see which items have actually been identified. Fumbles staff still hasn't, probably for the previously cited reason of Thunt being able to make up anything he wants for it. Anyway, I THINK the reason the cloak is on fire is because Fumbles used (though it certainly doesn't appear that way from the artwork), the potion from this update: http://www.goblinscomic.org/04032017-2/
Again, though, we don't see him actually using it, so it may just be that dumb game card. If it is that potion, look for Fumbles to suddenly be flying around like a cartoon character the next installment.
UPDATE: He updated... sorta. The last episode also got a color job (blue flames on the cloak), but now his archives are broken. You can't go back past the last update. Also, the Archives themselves have no active links for the latest chapter after number 22. The workings of his website confound me.