I asked for ideas on how to salvage the Playdate Dress over at the Oliver+S forums and one lady had the brilliant idea to add a flutter sleeve. Mine turned out more like a cap sleeve, but I think it actually distracts the eye away from the super-deep armholes. I'm surprised at how much I like the end result. And N likes it, even though it isn't pink, purple or flowery. (I did point out it's the same color as Princess Tiana's dress, so maybe that helped).
I'm still not entirely certain how to do the Christmas dress - I may start another "wearable muslin" tonight and see how it goes. We'll see.