Here are the main problems I think you'll have to overcome: 1) you need something big enough to dye it in, but you need hot water to dye, but you have to be careful putting it in the washing machine because heat+agitation = boiled wool, i.e. major shrinking. Maybe you could buy a big tub and heat water on the stove in batches? Or maybe you could fill the washer with cold or warm water, then add the dye, then add the coat and gradually add hot water and agitate gently with a broom stick or something. If the coat shrinks a little, you can probably resize it a little with a steam iron.
2) The lining. The lining won't take the dye the same way as the wool, which might be just fine. Also, if the coat shrinks at all, it may do so at a different rate from the lining.
3) All fasteners will need to be removed. Fine if you don't mind reattaching a bunch of buttons, not so fine if it's got a zipper.
4) Threads made of different material as described by above poster.
All I've been able to find so far is that a curved opening can be used, at least when there is ease (gathers), with a cuff. I haven't been able to find an explantation of why to curve or not curve though. A cruved or angled sleeve is also appearing in most older sewing/tailoring books (yay google books).
I feel like I have a book at home that explains what it's for, I'll check this weekend if I have time.
edit: it appears that the curve may actually be a way of adding fullness at the cuff-seam, without adding fullness throughout the sleeve.
I second what thesingingllamas said. If you have any patterns (like a typical dress shirt) that involve a collar stand, you could probably also use that, trimmed to the right length, since the collar is so short.
So I just took a closer look at the vintage pattern you posted. Do you still have it? Can you tell me which piece is missing? Because the pieces for the cape and for the jacket are extremely similar! I think you can easily (even easier than modifying the Butterick one) draft the front of the jacket from the front of the cape, if you have it.
As for pattern drafting books, the one I own is Patternmaking for Fashion Design, by Helen Joseph-Armstrong. It was a textbook in my pattern drafting class. I am sure that there are many other good ones available, though. I haven't looked.
Have you thought about what level of costumers you are making this for?
You mentioned making things out of PJs and T-shirts, so I am assuming it is a beginning audience, with little to no sewing experience. If that is the case, I might leave out real corsets all together. I'd put the focus on easy-to-make costumes with easy to use and find materials. I'd include basic wings, hats, fabric belts, shoe-covers, simple jewelry and accessories, etc. I'd also include examples of how to modify the basic patterns for an individual look (e.g. if you make this belt out of brown felt, it's for a woodland elf, but if you make it out of a fancy brocade, it's for a lovely lady!)
If you want to aim for the experienced costumer (in which case, I think you'd need to be a VERY experienced costumer) then what people ask about the most is the non-clothing parts. How to shape and paint armor out of plastic and foam, how to make paste jewelry, how to modify and style wigs to match a character, how to apply body paint and makeup. I'd also probably want a little section on sewing with the most common fabrics: how to mark, cut, and sew vinyl, spandex, velvet, satin, tulle, etc. I'd also want information on modifying fabrics--dying, aging, embroidery, etc.
Taking out flare is super easy! You basically just cut it off of the pattern. Actually, drafting and modifying patterns in general isn't hard at all once you see how it's done. If you really like sewing, I'd definitely grab a book on it from the local library (and buy one if you find you like doing it). It gives you soooo many more options--because who can ever really find the PERFECT pattern?