3d clothing game?

teeth

So being an artist I was thinking a dress up style game would be something interesting to fine tune my character and accessory skills. I was wondering about the clothing for this. I would be workin with another programmer but what would I have to do as the artist to make the clothes "fit". Meaning im sure clipping between clothing items will become an issue here so what do I have to do to make shirts clip pants? Of course the easiest solution would be to keep the skirts ending at the waist and the pants starting just below shirts but this seems boring to me especially if the player wants to layer pants with a dress. Also when does it become advantageous to use textures overlaid on the character with no extra model or is that somewhat outdated? If I were to do this how do I create the texture?