Eh... Even assuming the legend about the origin of the relics is true, just because something is made by Death, doesn't mean it's too horrifying or awesome to look at. Nothing in the books indicates that. In fact, the cloak looks pretty much like any other Invisibility Cloak, only more well made. There's no reason to assume it has any mind-blowing true appearance.

That said, an argument could be made that it can hide Potter from The Sight, since even Death can't see through it... But I wouldn't bet on it, considering The Sight has literally never failed to pierce through any veil... Even those of absurdly powerful creatures, such as archangels.