Looks to me like you have the ol' collision ooopsie. Look at Koji's walk cycle nude, and pay particular attention to the armpits and groin/thigh area. Poser characters have no collision check on themselves, and at places where there are serious creases/joint actions, the actual polygons interpenetrate. Usually this isn't noticeable, as it happens in an area you don't or can't see. The problem is that dyn cloth reacts very badly to collision violations of this kind. Sometimes it will simply stop the simulation, and the cloth prop reverts to its undraped zero state; other times the cloth will 'slip' between the vertices and get 'stuck' on the wrong side of the collision plane, with the results you see above. The first fix attempt is to adjust the cloth offset value slightly; this 'floats' the cloth above the figure, to prevent both this, and getting stuck in an eternal collision detection loop. You can also adjust the angle of the joint slightly, to see if there is a sweet spot that looks good without causing the issue (the graph editor is good for this. If it's that the shoulders are a degree to two folded inward too much, you can globally select the offending value for an entire animation cycle and adjust it in). It's also a good idea to keep a close eye on the fingers and toes. All those small polygons can slip right through the space between vertices, collide, and a similar mess (this one pops up more often with skirts and capes). Nerd made some freebie low poly props for the hands and feet to use in cloth collision; they are available at his site.