Attached Link: http://home.earthlink.net/~redink3d/V2ClothingPack1.html

Been there and done that (see the attached link). For obvious reasons I am relunctant to give full details of what my code uses at this time as I am trying to turn it into a marketable product. For what it's worth: There are multiple ways to skin this cat. The easiest way is to search for closest vertex matches on the figure and clothing. It has some drawbacks, one of which you may have hit. To get realistic looking items, as well as complex issues like skirts, the problem gets nastier. To turn it all into a relatively turn key operation I've had to crank about 7140 lines of code (LOC) or about 2400 effective lines of code (eLoc) for my core processing classes. Most of that has been necessary to handle various pathological cases. One nasty example is belts and other items getting distorted by the morphs. One of my post processing tasks involved going back through and getting the belts back to a semi-normal appearance. Another issue is that most of the clothing makers tend to try and go with lower numbers of polygons on the clothing than whats on the figure. This can lead to issues ranging from simple cracking to some pretty big distortions.