The development of carbon nanotube (CNT) based technology is limited in part by the lack of effective bulk methods for precisely manipulating and aligning nanotubes at the very fine scale. Moreover, the innate hydrophobic and inert nature of the CNT surface limits their compatibility with aqueous systems and flexibility for surface chemistry functionalization. This paper assesses the variety of methods developed to couple magnetically susceptible components such as ferromagnetic material with CNTs in order to overcome these limitations. In addition to reviewing the past 16 years of relevant literature, our own methods for noncovalent surface coating of CNT's with magnetite nanoparticles are described. The application of such composites is then explored within the framework of a magnetorheological (MR) fluid. It is found that the addition of magnetite nanoparticles to a MR fluid enriches the available MR response, resulting, in some cases, in an increased sedimentation stability, larger saturation critical stresses, and faster response to time varying magnetic fields. Finally, our own composite based MR fluid is discussed, and shown to possess a field dependent response that is a hybrid between that observed in ferrofluids and conventional MR fluids.