Hi. My english is not good too, so here we go x)
You can't move the vertices just like that, is too much, because your clothing will be like "super square/straight", and your texture for this area will be all distorted and blurred. I don't use Blender, but there must be an option to create more vertices in this part, then you'll have more subdivisions, just like the top of the mesh. But I don't know how to help you with that, so I'll tell you what I usually do using
Milkshape 3D. I don't know if this is the better way to do but as nobody replied yet, is better than nothing.
You can morph some meshes. For example, take this one you like and delete the very bottom vertices (so you don't get the legs middle part), then open a long dress (you can use that red long party dress, is base game) and delete the top part, but make sure your two parts are not so far away, just make them "joint". Then you have to merge your vertices, I always make this one by one. To do this, select the two vertices you want to merge, then go to Vertex Menu - go to a plugin named Sims 2 Unimesh Vertex Data Merge. After you finish this, select the line of ugly vertices and go to Vertex Menu - Allign Normals. Move and scale the vertices to adjust the shape you want.
You can do the same steps for morphing sleeves.
Remember to don't regroup your mesh yet (if you are morphing two meshes you should have 2 groups), keep them separately until you finish everything. Go to the Matterials Tab and put some texture to
Assign, it can be the multiplier of the red dress for example. Where it says "default", change to "ignore alpha". Then go Window Menu - Texture Coordinator Editor, and adjust the coordinates for your texture area.
lavoieri.tumblr.com :)