Is it worth the effort to gear companions? If so what are they able to equip?

yeah definitely. I found that as I upgraded my current armour to the next tier, eg dwarven to orcish, i could hand them my old dwarven armour which would be vastly superior to their iron or steel stuff.

I'm up to dragonplate armour and I just gave Lydia my ebony set. She can tank a lot of damage, and she can give as good as she gets with her legendary ebony sword.