There should be no problem shortening the sleeves. By looking at the picture I don't think you would be able to cap the sleeves, there wouldn't be enough fabric to gather.
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Curve: The loveliest distance between two points. ~Mae West
I'm not really sure, but I think it is worth talking to a seamstress about. I would just got to a reputable place and take the jacket. They should be pretty honest with you about how it would look and whether they think it would be very easy.
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"Despite all your best intentions, sometimes, fate wins anyway."