Wow, that is looking pretty good!
I took a look at the file you posted, kinda really picked it apart, and I understand what you did. I made a couple of basic changes to my file and tested it out. I see the biggest problem with my file was the fact that the end of the sleeve was weight painted to both arms. The left arm sleeve was weight painted to both the left and right arm. Giving me a mesh like this:
Now I can see how that was giving me the results I was experiencing in the first pic I posted. Comparing the two, they are quite similar.
I manually weight painted that, and noticed that the end of the sleeve I couldn’t weight 100% to the arm bone. I guess I just moved on and never checked the mesh without the cloth system on it. I see my errors now…
Will you please explain this to me:
What are the rendering issues? I’ve never heard of render issues with the subsurf modifier before.
The cloth sim is not nearly as demanding on my computer as the smoke/fluid sim is. So I can handle the cloth sim, and thanks to you, that’s the route I’m taking.
Thanks a lot!
And I’m off to model a proper robe 
Randy