In the chapter, The Land of Shadow, Sam gives Frodo his elven cloak to wear but suggests Frodo wears it over the top of his orc clothes.

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Later on they are spotted by an orc company, sitting at the side of the road trying to be inconspicuous but I would have thought an elven cloak would look and smell wrong to the orcs. I don't recall that Frodo took the cloak off and later on Sam uses it for the two of them to hide under. Why did Frodo wear the cloak over his orc-rags? Wouldn't it have been safer to wear it under the orc-rags? And why didn't the orcs see the cloak for what it was?

Elvish cloaks sure would have the ability to hide from enemies, be it Orcs, Goblins or Russians, and make it impossible for those enemies to detect them, by vision or smell. The Elves weren't dweeps... they knew how to make magical cloaks and put part of their soul in everything they made... look at Sam's rope for instance.

I'm sure the cloaks didn't smell like tarq.

When they first met a company of orcs, they didn't hide although Frodo was blatantly wearing the cloak with the brooch. Later, they did hide underneath it from the orcs but why didn't the orcs notice the strange cloak in the first place?

And remember that orcs plundered the dead, their own and their enemies. So the orcs that caught Frodo and Sam would just think that the cloak with the jewel was something that Frodo the orc had taken off of a body somewhere.