When I see people at the grocery store in suits/heels/etc I assume they're coming from/to work or another dressy function, not that they dressed up in a suit to go shopping. When I see adults at the grocery store in PJs (doesn't happen too often), I assume they're having a bad day/week/month, and might be parents, especially new parents. When I saw my classmates in HS and college wear PJs or giant baggy sweats to class with their hair nicely done up, etc...that seemed disrespectful. But maybe they felt the same about me and my air-dried then-frizzy hair pulled back in a ponytail and no makeup, in spite of my wearing Real Clothes (TM) (i.e. jeans and a t-shirt).
Honestly anything between PJs and suit/dress/heels on strangers doesn't really register on my radar (though I might be put off some by activewear in a nice restaurant). When I'm interacting with others, though, more put-together people do come across as more, well, together. Since I know others are (consciously or not) making that determination about me, I try to make an effort myself, even if that means a more form-fitting Target t-shirt instead of a free event shirt, a cardigan instead of a hoodie, and flats instead of running shoes.
This doesn't have to cost a fortune. Some people on here claim to make occasional awesome fashion finds at thrift shops. I shop at Ross, TJ Maxx, Marshalls, Target, and JC Penney (with occasional splurges at REI...). The vast majority of my wardrobe is shirts under $12, sweaters under $20 and pants under $35 (and some are more under than others). And while it's not minimalist/capsule it's also not particularly large (especially if one excepts my collection of old ripped jeans and t-shirts that's for lab wear, sleep, and home only).
It's also entirely likely that many of the people you are seeing are shopping boutique stores; but it's not necessarily the case, and it's not really all that hard to up your fashion game a little. Honestly it makes me stand up a little straighter and be a little more focused when I put on my Nice jeans and the Nice shirt that's super flattering and Nice shoes. :)
My policy is that your crotch must be covered - front and back. Ideally, the stuff you're wearing shouldn't smell too bad. Other than that, anything goes. I'd far rather we get offended by people who have chosen to be fat than people choosing to wear old clothing.
I can't believe you just compared a major lifestyle change with deciding what clothes to put on in the morning. Virtually no one wakes up and decides, "Hmm, you know what, I feel like looking fat today. That's the image I'm going for." (Yes, there is probably one, but it's not why most fat people are fat.) I don't want to turn this into a discussion about weight loss, but your comparison was completely invalid.