That's the technique I use now for curing sculpty. I microwave a cup of water for three minutes and then put the figure in the boiling water for at least five minutes. It works great and I never have a melted mess.
If I can't find some brown cloth or leather, I'll sculpt it. Cloth would work better over the jointed arm.
I cure my sculpy in boiling water on the stove - 3 minutes for thin pieces attached to figures. No permenant damage yet.
As far as leather goes. I've picked up some vinyl table cloth material at Joanne Fabrics. It looks like it would work pretty well for faux leather. It may be bit too stiff for this custom though.