What are the pros and cons for covering a steel fence post in wood?
Wood being used to cover or encase a metal post, I would consider a reasonable and acceptable practice.  The wood would need to be protected from the elements as any other application where wood is exposed.  Many paints, stains and wood treatments are used for just such purpose.  Ongoing maintenance will be necessary to ensure proper protection.  Some wood products display a natural ability to stand up well when exposed to the elements, i.e. Redwood and Cedar. Additionally, the newer composite materials stand up very well to wind, rain and sun. Construction with metal and glass is a relatively recent phenomenon. Stone and wood has been use since before recorded history.