How to make the mesh smooth and not jaggy?

Always share the blend and package files please
Probably the reference was too short

It's the same exact thing as before. I cannot provide more accessible and detailed explanation than i already did. Since following instructions blindly results in the repetition of the same mistakes, you need to look at different components of functionality of your item in the area where the problem occurs and find the solution yourself.

Try to look at different components - uv_0, uv_1, weights, vertex paint - and explain (here) what it can be and why do you think this way, and I will try to guide you to the right answer without spelling it. 

Q: How to understand what will happen if you will not do not do something right:
A: Intentionally do it wrong and compare the result to the original.
- clone a long skirt, export the blend, vertex paint each mesh with 00FF00, save, import this file back into the package;
- open CAS, find the modified skirt, increase the weight of the sim, then change the thickness of calves;
- then select the original skirt. You will see a big difference in how the skirts morph.


The logic is right but the solution and the conclusion aren’t. Let’s do it the other way and please follow the steps this time instead of just reading them.

Q: When does the issue occur?
A: During body shape customization.

Q: What aspect of functionality is this?
A: Morphing.

Q: What controls it? (morphing)
A: Breast bones, vertex paint, uv_1.

Q: How to check each of them?
A: Clone an item of similar overall shape and compare it to yours in those aspects ( breast bones, vertex paint, uv_1 ). I will be referring to it as a reference.
1). Breast bones.
- Should your item be affected by breast bones in the area where the problem occurs? No.
- Is it? No.
- Is the reference (in the same area)? No.
Conclusion: breast bones are not causing this issue.
2). Vertex paint.
- Should your skirt be vertex painted with a color meant for skirts? Yes.
- Is it? No.
- Is the reference? Yes.
Conclusion: the mesh is vertex painted the wrong way.
Solution:
- Change shading to Bounding box to be able to sample the solid color;
- Select the reference, in Vertex paint choose a dropper and sample the color in the same area where the problem occurs on your mesh;
- You will get 3FFF00, a color of the robe morph ( meant for skirt-like bottoms and sometimes the breasts) . Now you need to understand what area is painted by it. Does it make sense for legs to behave like skirts? No. If you will sample the color on the legs, you will get 00FF00, a color of the skintight morph. (You painted them with 3FFF00 and got a gap in the knee area because now they morph differently than the other portion of the legs). Does it make sense for a waist to be painted by a color meant for skirts? No. Start sampling colors in the groin area. There will be 00FF00, followed by in-between colors, and then by 3FFF00.

- All you need to do is to either transfer vertex paint, or manually paint the skirt like the reference.

To transfer vertex color:
- make sure the reference and your mesh are visible and selectable;
- select your mesh, add Data transfer, choose the reference as Source object, set the rest like in the pic, Apply:


To paint it manually, read the quoted part only

Are you done? No. There is still uv_1.

3). uv_1.
- Select the reference, enable sync and select the same area where the problem occurs on your mesh. Do the selected uvs looked ripped? Squished? No.
- Select the same area on your garment. Do the selected uvs looked ripped? Yes. Do they look squished? No.

Why do they look ripped? Was the skirt of the reference split there? No. Was the reference too short? No. Then why? Because the skirt of the reference is puffier than yours, which would not be a problem if the legs were not closer to your skirt. So instead of receiving the data from the skirt of the reference, it receives it from the legs.
Conclusion: the reference was unfortunate.
Solution: to use a different reference to re-transfer the data or simply remove the legs from this one.

Q: Could the cause(unfortunate reference) of this issue create any other problems?
A: Did you transfer anything else from that reference? Yes, the weights. The skirt of the reference it puffy, it is further away from legs than yours, there is less risk of it clipping into the legs. Your skirt is tighter and the way it is rigged should be closer to what the legs are rigged than a puffy skirt.
Should you re-do the weights? Well, fix other issues and then check how it behaves in the game.

THE CONCLUSION: The problem is caused by the choice of the reference and not studying it.
THE SOLUTION: To use a different reference that is of the same overall shape as yours.

And there are a few other mistakes:
- The flowers on the belt are not vertex painted;
- There is something wrong with how you separate selection into a new meshgroup because it create loose geometry. Just select the area, press P, choose Selection;
- And again, the rig contains nothing under it;
- And again, you separated the mesh into meshgroups before making sure it moves and morphs perfectly;
- this is not a mistake but something you would benefit from. When you have small details like the flowers on the belt, you can make their uvs bigger so that the texture is of higher quality.