What are the simulation settings? Check all three boxes. That normally works for me ;o). As for seeing the facets, that's pretty much common with dynamic quaded clothing. What is the current resolution of that dress? I'd consider smoothing it once more. Dynamics works better the higher the res. If smoothing sends it over 22,000 polys that might bog down your system a little bit ;o).

What I would try:

Turn the fold resistance down a little bit. Try 3.00. Turn the fabric density up to about 0.0100. The setting you have is a bit stiff. Rerun the sim and see what happens :o). One more thing...you can turn air damping off if you like. I don't like the "puffiness" it causes in a static pose like that ;o).

Another thing to consider: the more square your quads are, the better they behave. The quads in the skirt especially are getting rectangular.

Laurie