As far as I'm aware no one has actually had any damage done by using the cape that comes with the pleo, however the elastic bands on this cape are very tight around the pleos legs and pull and pinch the skin. I'm not aware of anyone who has used the pleo cape for long periods of time on their pleo because all of us have been concerned about the damage that might be caused by long term use due to the elastic bands. There are a few things you can do if you want to use the cape - you can put socks on your pleo and then put the elastic bands over the top of the socks. If your handy at sewing you could cut off the elastic bands and attach a couple of strips of material and some velcro to fasten around the legs instead.
Or you can do what most of us here have done and go for a different type of clothing altogether. I have a shop here on the forum where I sell pleo clothing but there are others who sell clothing made for pleos here on the forums too. Also I think there is a seller on ebay who does pleo clothes. Otherwise you can always try dog clothes. A lot of small dog clothes will fit a pleo, it is always best to take the pleo along to try things on before you buy though as some dog clothes can be too tight around the legs or too loose around the neck areas. Another option is to make something yourself.

If your interested in what is available here on the forums just click on the stores tab at the top of this page under the shout box.