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Before all that modeling,  I made an entirely new figure from David, had it scaled to be taller, morphed its muscles and exported that new figure as my manikin for the clothes modeling in Maya. That's why it fits so perfectly when I exported the clothes as a prop. (Fig 1)

When I got into the setup room and used the same bones of the new David figure I built, they are shorter (Fig 2) and the shirt I modeled scaled up when I put it back to the pose room!  (Fig 3)

Even if I "conform to" it, it doesn't fit to the body and its all messed up :(

Where did I go wrong? Does this mean I should be modelling with no morphs and no scaling on the original figure and once I rigged the clothes and fits perfectly, I do the morphs and scaling next to the figure and to the clothes?!

All that effort wasted....     :'(

Help please before I tear my scalp away in frustration....

Hey Owl, From what I can see, it appears that the scaling information does not stay within the "new David" cr2 file, hence the shorter bones in the setup room. One thing to check is the scaling and JP data in your cr2. There is a utility (cr2 builder? or something close to it) used to compare and transfer data between cr2 files. I'd do a side by side cr2 comparison. Second, depending on the amount of scaling, I'd build the initial mesh to fit the base David, and then scale the mesh up for the new character, and make it a full body morph. This way, it uses the base David rig and JP's, JCM's, etc, but it can be morphed for your character. Anton and PhilC would probably be of more assistance- look at Apollo's ADS system and PhilC's Wardrobe Wizard and other clothing utilities. I hope this helps. -Starkdog

Your conformer is probably adding the scaling of the base figure again .
You should be able to simply scale your clothing back to fit the base figure, and when it conforms the scaling should be applied.

The morph can stay in , because its not a clothing morph Poser wont add it again .

Dont go into setup room with the clothing. Just use a donor CR2 and replace the geometry lines (there are two of them) with your clothing geometry

When exporting to OBJ, it is VERY VERY IMPORTANT to start with the base figure at zero pose, and with zero scaling.  Keep those things strictly within Poser and only apply them at the very end.  Different import/export techniques can screw you in a variety of ways, the safe way to do it is avoid any scaling altogether when doing any import/export.

Quote - Where did I go wrong? Does this mean I should be modelling with no morphs and no scaling on the original figure and once I rigged the clothes and fits perfectly, I do the morphs and scaling next to the figure and to the clothes?!

You need to model around the base figure, no morphs and DEFINATELY NO SCALING!
More advanced modelers and riggers can get away with introducing morphs, but scaling body parts almost always creates problems. (Except for a few experts, and I'm not one of those)

Personally I think it is OK to model around morphs, in my case it worked fine, but scaling or modeling around a non-zero pose is definitely troublesome.

So I guess what's next is to find a good software that will put morphs into the clothes so that if I morph David, the clothes will morph too?

Very good :)

Phil Cooke's Wardrobe Wizard does a pretty good job of adding combinations of morphs into clothing, both your original morphing and any third-party morphs.  Another option might be DAZ's Clothing Converter.