Yaya, I think JessM hit on something important. GD may, indeed, be taking out unresolved feelings about the baby on you. I'm sorry about that, but no worries. This too shall pass.
Jaxxie, I'm glad my comments were helpful. But I don't think you're "Bad Grandma," just a GM with clear rules who may need to change her tone a little while enforcing them. Not something a person can do overnight, but you'll make it, I'm sure.
As for clothes, I agree with you. Please remember that what's being marketed is not GD's fault. Also, these days, sometime girls as young as 8 or 9 are under pressure from their friends to wear certain fashions. Also, does her mom give her a big voice in what she wears? If so, then she may just not understand it if you nix or insist on certain choices. The idea of giving her one or two appropriate outfits to choose may be the solution.
COUNTRY, CITY, AREA, PLACE -Game 21