... so, why don't the Falmer wear it? When I loot them it says it's equipped but it doesn't display on them. Supposedly they have it on , but they are naked only wearing a loincloth. They don't even have the helmet on. They would look very intimidating if they wore their armor. Unless it's a glitch or an oversight. Or is it supposed to look like that?

...yes they do?
well the falmer warmongers at least, who actually are meshed to have it on
but if a lower level falmer has them in their inventory it isnt displayed on their body
falmer are creatures not npcs so the armor (made for npcs) wont actually be seen on them (except the warmongers who are made to have it actually on them in their design) even if it shows up as being equipped in their inventories

Thank you for that explanation. I was wondering why it showed these higher level armors as equiped even though they did not display.