What happens if Cas get relegated?

You get him back.
If we get relegated, we have bigger problems than a player on a one-year loan.

It will be to England's advantage as well as to Cas' benefit if Powell can get him to chime into the line & pass as well as Dorn did.
It will also make a massive statement about the effectiveness of all the coaches he's had at Leeds.
It all looks like very shrewd business by Cas & a monumental cock-up by Leeds that they could not sort Hardaker out.

Certainly not a great outcome for Leeds. As it's only a 1 year deal, with no guarantee he won't be back in 2018, it makes it difficult to use his cap space on a long term signing - we're only guaranteed his cap space for the 2017 season.
Having said that, that's probably a bit of a red herring, as I highly suspect we've got plenty of space left on the cap even including his money - if not, something is seriously wrong with our wage structures (which I can't imagine GH would let happen). This current squad should have plenty of cap space left.

If he does play well is it possible another club could come in and offer more money to snatch him off you?

I have two comments to add:

1) Does this deal effectively put Hardaker in the window for a year? Could a bigger club come in for him if he plays well? It would be funny if it did as Cas fans are going on like they've won the lotterry and its only a season long loan initially!

2) Where's the money in the salary cap from Sinfield, Peacock, Achurch, Leuluai etc leaving? granted a lot of younger players have got improved contracts but there should still be space for at least 2 decent signings! if Caddick and Hetherington want to enjoy another 20 years littered with Silverware they need to "show us the money"

A year is a long time in rugby league. By 2018 we may have lost McGuire, Burrow and JJB so cap space will be available If required. If next year goes badly we may also have a new coach who may want to offer hardaker another chance if he goes well next year. Agree with earlier comment if cas can get him to enter the line and then pass he could be a revelation. At moment he is well behind Tomkins and lomax with ball in hand.

I don't understand the salary cap, can we use his wage in 2017? Do we also now have 1 overseas place free ?

If answer to both is yes I could see another mid season signing coming next year.

As Cas dont have the salary cap space either they've taken Zak on a "buy now pay later" deal. His salary will remain as part of our salary cap whilst ever he is out on loan so this doesn't allow us to spend it on another player. This is desperate stuff for Leeds !!! A lot can happen before the start of 2018, he may actually turn up back on our doorstep. All we've managed to do is get rid of a disruptive player who unfortunately has all the tlent in the world and I suspect Powell will be a good influence on him

Hardaker is at Cas 2017 on loan, the deal states that if Cas want him after that they pay Leeds a pre agreed fee for him and have 1st refusal. This stops any other club signing him under Cas's nose. Cas have had your pants down Leeds, its a win win situation

What does it say about the coaches at Cas if he doesn't even regain his 2015 form?
Also, what does it say about Cas if they can't sort him out over the next 12 months?

I'm pretty sure you're factually incorrect on the way the cap works. Whatever Cas are paying him this year will count against their cap (and the same amount be deducted from Leeds). That's why the Tigers had to ship Ben Crooks off to Leigh for the season on loan, so that they're not paying his wages on the cap and can use that money to pay Hardaker.

All of a loan player's salary cap value counts on the cap of the team he is playing for, regardless of how much each club is paying him. So all of Hardaker salary is counted against Cas' cap for 2017.