Thanks for the pics....
Here are my thoughts, recognizing the situation as you explained.
With a little bit of repair to the risers, you could brick or tile the steps quite easily. I would chop out the deteriorated corners reform and replace the corners tying it all together with some rebar drilled into the existing concrete. If you choose to use the brick, i would put a bit of an slope on the tread to make the riser brick work out with a halfway decent size bed joint.
This is a classic situation in which to take a real liability and with a bit of creativigy you could turn it into a real asset, and in the process become somewhat of a cult hero in the family. It's obvious that code etc is not important....so with no restraint why not go a little crazy.
For tile/slate the sky is the limit.
I personally have always thought that doing a mosaic/crazy pattern out of 4 or 5 complimentary outdoor tiles in would be kind of kool. It also would be fairly easy as with a crazy pattern you don't have to have the careful jointage of traditional tile. Below is a picture of a crazy pattern...now just come up with a few more colors and stick it to the steps.
Or here is another really cool product that you might be able to make work....i especially like their pebbles for stairs.
http://www.islandstone.com/gallery.php?id=55&keywords=Pebble_Stairs
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