I've been snipping the paper towels (and rounding edges) to just slightly below the height of the model, no more than 2in wide. Hold it up to the model, curving it around to approximate what you want. You've got quite a bit of working time. I'll probably work out some sort of template for SM scout armor. before I do all of the regular models I have.
Watery glue
should work, but you'll need to make sure the glue is thoroughly mixed with the water, and I don't know the ratios. Too much glue and you risk ruining the texture. Artist's matte medium (you could probably use gesso as well) is a really, really convenient mixture with more uses than just this. Wipe off most of the excess or it'll run down to the base and pool there (see middle photo).
This is the brand of towel I'm using.
Viva towels. I suspect you could get the same effect with thin cotton cloth. As an added niceness, these particular style of towel also is really convenient for wiping brushes off when painting. Unless you really like the look, don't bother with anything that has quilting on it; I found that the cheap "quilted" towels are effectively 2-ply and have no real texture to it. Looks like garbage once paint is on it. I have not tried toilet tissue, but I would be worried about fragility with that. The woven Viva towels are very durable.
I don't know what would be suitable for those not in the US.
This technique would also work well for tarps over tanks (probably where part of the idea came from, I think the tarp idea is in the old GW how to paint tanks book).
Oh, and I think it helps to not glue the head in before applying the cloak. One of the big downsides to this method is that you generally need the arms on the model before you do the cape. While I think you could do this to an already-painted model, I'm not that interested in trying.
The color for the painting was borrowed from my Sisters army and the texture took the washes beautifully. I might also look into doing robes/clothes for models in this manner. I think that SM tabards are still probably done better with GS (unfortunately).