He has clothes!!

My favorite little character i have given clothes or robes or something but im not done yet but i dont know how to make the cloth look better
The Original

http://i266.photobucket.com/albums/ii247/Mach1723/Gallery/MonsterToyFinaEditl.jpg
The New One
http://i266.photobucket.com/albums/ii247/Mach1723/Gallery/Toywithclothes.jpg
Course i realize the clothes are blocky but i already have to many vertices (subsurf)
to add any more so need a way to make them less blocky without adding vertices and i have tried just smooth it in edit mode but it makes it weird