A very good discussion here. I think the bottom line in dressing is charity to others. That may mean covering up in some instances (I've decided this year that my upper arms must be removed from sight) or otherwise being more instep with trends (in general, not slavishly). The essence of charity is consideration of the needs of others before yourself, and this may mean going against the grain at times. Imagine, what constituted a hair shirt in days of old might mean taking five minutes to put on lipstick and a little blush today. Covering erogenous zones is a given, but the point Red is making is that we evangelise every time we interact with others -- even a quick stop at that market or swapping kids for play dates.
An example of this evangelisation would be how a snappy dresser sees the faith through the women around her. It is reasonable that if she's not convinced of the Gospel herself, she could legitimately say, "Given what I see, if I take Christ seriously, I surmise that I'll have to burn my existing wardrobe." Now of course that's wrong, but being poorly catechised, it's naturally that she would operate by the visual cues offered to her. Consider the level of expectations and how you can make "love of Christ" attractive, joyful, appealing. Remember, there's plenty of latitude and room for personality.
I usually enjoy What Not to Wear, although there's too much emphasis on being "sexy.." If you can ignore that, the advice is basically good, and the excuses why women get stuck in disaster are fascinating from a psychological perspective.
There is a fundamental freedom both in the faith and contemporary culture. Take advantage of it.