I could go for SR 17 or anywhere in the 15-20 range, as you like. I'm also fine with the limits you suggest and your edits to the insanity part. The bit about removing the cloak is good. Let's just break it into two sentences at "unconscious."
How's this:
Cloak of Figments: A ragged black cloak woven from wispy strands of shadow, the
cloak of figments is a cursed minor artifact that grants its wearer spell resistance 16 and immunity to mind-affecting effects. When worn, the cloak appears to be a cape formed from tiny humanoid shadow-creatures that crawl over the wearer's back and shoulders. These "creatures" are actually illusions. They constantly chatter nonsense as they transform from one monstrous shape to another.
Unfortunately, the wearer becomes permanently insane as per the spell
insanity as soon as they put on the
cloak of figments (in campaigns using sanity rules, treat the character as having -10 sanity points). This insanity cannot be cured or limited as long as the
cloak is worn. The
cloak can only be removed if its wearer is dead or unconscious. In other circumstances the
cloak of figments becomes insubstantial to prevent its removal.
As an at-will standard action, the wearer of the
cloak of figments can cause some "shadow creatures" to separate from the
cloak and become conjured astral figments in any adjacent space. The
cloak can conjure four Small astral figments or an equivalent number of larger figments. A Medium astral figment counts as two Small figments and a Large astral figment as four. A maximum of twelve Small astral figments (or equivalent larger ones) can be in existence at any one time. The wearer can dismiss any number of figments as a free action.
Strong conjuration, enchantment, abjuration; CL 20th; weight 2 lbs.