I think that Sunfire Cape could use somewhat of a small rework, but I think there are a large group of items that could use a rework because they are never or rarely used. It was no doubt fun to stack them, but was really dumb before when stealth characters could run around and damage without attacking.
Let's take a look at the Sunfire
Giant's Belt 1110g - 430 health
Chain Vest 700g - 45 armor
Total 2610g - 450 health/45 armor/40 dmg per second magic damage passive
2.58g per health on giant's belt
15.5g per armor point on chain vest
You get 20 bonus health for the item, no extra armor, and then the passive.
Based on previous calculation, you spend 51.6g for the 20hp and 748.4g for the passive. Very expensive.
Now let's look at Randuin's
Chain Vest 700g - 45 armor
Rejuvenation Bead 250g - 8hp/5
Total 1350g - 50 armor and 20hp/5
Heart of Gold
Ruby Crystal 475g - 180hp
Total 825g - 200hp + 5gp10
Cloth Armor 300g - 18 armor
Total 3075g - 75 armor, 350hp, 25hp/5, Unique Passive 1 - 5% Cooldown, Unique Passive 2 - 20% chance slow movement on attack by 35%, Unique Active - Slow attack/movement by 35% for 1 second + .5 seconds per 100 mr and armor.
15.5g per armor on chain vest
31.25g per hp/5 on regen bead
For 400g, you get 5 armor and 12 hp/5, not to mention the passive Based on the previous calculation, you would spend 77.5g for the armor and 375g for the hp/5. Already at 452.5g, you have already gotten part of that for free as well as the passive.
2.64g per hp on ruby crystal
For 350g you get 20hp and the 5gp10 passive meaning you spend 52.8g for the hp and 297.2g for the passive.
16.67g per armor for cloth armor
You get a bonus of 150 health, 7 armor, 5hp/5, Passive 1, Passive 2, and Active for 600g.
This means you would spend 396g on health, 156.25g on the hp/5 either 116.69g or 108.5g on armor depending on whether you use the cloth or warden's mail number. In the end you get the passives and active for free not to mention saving a bit of gold for the other bonus stats.
Based on all the stats it provides, it is a superior item. That is also why it is classified as legendary vs. advanced over Sunfire. In addition, it is a more team based item in comparison. While Sunfire does give 100 more hp and the passive, Randuin's gives more armor which alone increases your effective health not to mention the addition of hp/5.
I think the Sunfire has long been overlooked by other tank items that provide more useful benefits like Randuin's. Sure it is a great item for tanks who can just take a beating forever or can stick to champions, but with resistances the damage does become somewhat negligible late game. I do tend to think it's main purpose is to help champions like Shen who can't clear/push lanes very well/quickly.
Suggestions for Sunfire:
1) Increase the amount of health it provides to 500-550.
2) Make the combine give bonus armor to make a 50 to 55 armor total.
3) Have the passive somehow increase in damage over the game ever so slightly per level or base it on max hp as already suggested. I think 1.75% might be a bit high if you do the math since it already does 40dmg/sec. Let's say the average tank late game has 3000-4000 health. Max tanks might have near or above 5000, but that doesn't happen often generally due to not enough resistances to go with that amount of health. Going with the average numbers, 3000 adds 52.5dmg/sec and 4000 adds 70dmg/sec. Total that is 92.5 - 110dmg/sec. Quite a lot for any tank. Tanks are meant to tank and cc, not do tons of damage. I think a number between 0.5% and 1.0% inclusive would be fairly appropriate, but would require a lot of testing. That would limit the gain to 15-20 or 30-40 dmg/sec gain for a total of 55-60 or 70-80.