I have no idea what I've done wrong

Hi. Starting a package from an item of similar to yours shape, transferring all data from it and importing it back will ensure problems like this do not happen.

yfBody_Chemise, from which you started the package, is not affected by skirt bones, is too short to be.
Your item is longer and received data from something that was affected by them.
Now the mesh distorts in those areas because skirt bones should not be there.

This issue can be fixed by starting the package from a different item and importing the blend there.
However, before doing that, you need to at least replace the body, preferably remake everything, starting from re-importing the .obj in the scene:
- by default, the mesh is one sided. The other side appears transparent. For the jacket to not appear transparent on the inside, you can add the other side there. For the skirt to not appear transparent, you can close the hole at the bottom. You've done both, as you should have had, but you also added the other side everywhere else on the garment. This increased the polycount and now it is 4 times higher than that of the most complex maxis meshes. If you plan on sharing your content with others, high polycount is the number one thing to avoid. If your content make the game load longer or work slower, it will be deleted and a person wont download from you again;
- another reason the garment is so high poly are buttons. These 5 buttons, some of which arent even visible, are responsible for 1/3 of the polycount. There is no point in them having threads or holes, if you wont even see that up close. You should either use custom buttons made of simple cylinder or delete everything unnecessary and retopologize the rest;
- you should not join the body with the garment until the latter receives weights, uv_1 and vertex paint. Now the leg is affected by skirt bones, which is not how it should be;
- dresses are vertex painted with two colors. You should just transfer vertex paint from the reference as well;
- keep Backface culling enabled, right now faces at the bottom are facing the wrong direction;