I'm not sure if it matters what the weapons are made of in this game, as their weapons do pretty much the same damage as everything else.

I think it's appropriate for them to wear the armor and use the weapons they do for 2 reasons:

1) Tradition/getting back to their roots.

2) Despite having some clout in Markarth, they're still by no means a top dog of a faction. They're still on the run, from both the imperials and the nords, and are forced to live on the fringes of civilization and scraqe by with what they can get from the wilderness. Besides, that book Madmen of the Reach also made it sound like they are intimately tied in with the natural world of the Reach, and so probably wouldn't deign to use the synthetic manufactured stuff that the rest of civilization uses.

Well, now that the Creation Kit is out, maybe its time to revitalise this issue. To respond to some of the posts above: In truth I don't care what the current "armor" is replaced with, as long as the replacement is realistic and functional. As I'm simply requesting a change, I naturally have no power over the modder who takes it up, I'm just bringing it up incase it is noticed and adopted by any of the many talented modders on these boards.

And apparently no one commented on forsworn gear already being steel gear, in the context of smithing (you will need steel ingots to improve it).

That said, the original poster's request was trivial to accomplish: unpack the .nif files for steel armor and weapons, and rename it as forsworn armor armor and weapons. That's probably half an hour's work from someone that knows how to deal with file names, and has a tool to unpack the meshes bsa. It would also be rather boring, in my opinion (I especially dislike steel helmets, in skyrim), not a big deal.