I know for a custom puppet I worked on I wound up making the dress. I looked at patterns at Wal Mart to determine basically how it should go together and the shapes that were common to what I was looking for. I used scraps for the prototype and the shiny good stuff for the final project.
It worked pretty well. Other than that kids clothing like ravage said. I usually get 18mo-3T depending on the puppet. I've been told not to overlook places like Goodwill. They have some gently preowned clothing at bargan prices. I haven't taken this route since I have a bunch of clothes left over from when my kids were smaller...(i.e. my wife is a bit of a pack rat and my kids were never in any danger of having to go naked)