Cloth has nothing to do with the server.
Cloth was deprecated on the client for three basic reasons outside our control.
1. Performance, even with hardware, was poor. Especially, because you wanted everyone (or most people) to have simulated capes, hair, clothing, whatever. And, the performance really only allowed about .... 3 capes.
2. The drivers for the hardware caused graphical performance issues, especially under the kind of scene load you'd have with an MMO where there's more than about 3 people with capes on.
3. The tools for creating the influences, beyond being not great, required Max or Maya. Beyond the "not great" thing, we've been pulling functionality out and away from Max and Maya so they can eventually be removed as a dependency.
We are looking at options to bring usable cloth and hair simulation in. And, we would do so today if the engine was used purely for 3 dudes with capes standing in a room, but MMO scenes are more complex than that.
Cheers