Success! Got it figured out. Believe it or not, it was because I had auto smooth turned on in Milkshape. Ugh. Such a simple solution that took days to find. I still don't know how to make morphs or how to make the dress work with sliders but the edges are fixed, at least.

I'm planning to write a tutorial but I'd like to at least figure out the morphs and slider issue first if I can.

I can't get thumbnails to appear in the CASPCloner