You should be able to wear them in LD, but only over the armor peice they resemble. That way you can make your stuff all color-matchy. I guess there would have to be a way to distinguish between things that have a retextured model of a related item but with different statistics. Still not a big deal, the gunslinger hats look pretty similar >.>
I'm sure there could be a way to toggle it off.
I'm all for making it possible to see costumes, but it has to be as an option. I like your idea, but it should still be possible to turn off. So you would have three options - no costumes, costumes that match their actual armor only, and full costumes.