I've got a few screenshots to show exactly what I did.

1. Imported the Merc Warband .cas file:



2. Went to File then Merge to get the cape I got off the Centurion .cas:



3. Selected the options as shown below when merging in the cape:



4. Selected "Use Scene Material":



5. Another box came up, clicked "No to All" (remember reading to do that in a tutorial somewhere):



6. And the guy looked great in max, so I imported him. Everythings sorted out in descr_model_battle etc, so the problem is with the model somehow: