As a general point I notice that questions about confidence and body-image crop up here rather a lot which I find worrying. I think it's important to wean oneself off a reliance on physical appearance as the basis for self worth. As you grow older ones appearance is likely to deteriorate anyway so you need something else to give you confidence with others.
As for the issue raised by the OP, if he wants you to dress up for him then I'm sure he is going to be pleased with the results. Bear in mind that he will have had to pluck up a bit of courage to ask you to do this - he could not have been totally certain you wouldn't laugh at his desire - so why not match that by going with it. You really have nothing to loose.
BTW - I have always wanted Mrs G to dress up for me but, being the totally practical sort, she has always said she "just doesn't see the point" <bang head on wall smiley>
If it's dressing up for a sexual partner, I see it as, 'I have sex with this person anyway, they know what I look like, they know my hang-ups, they want to fuck me regardless, I may aswell dress in something that I know is an added turn-on for them'. You're going to have sex with them anyway, you may aswell wear a sexy outfit in the lead up to it, it's all going to end up on the floor anyway. I detest with a passion most of my body, buuuuuuuttttt any guy I have had sex with, obviously doesn't. Every guy I have been with has had hang-ups about themselves too, things I either haven't noticed (stretchmarks), don't think is an issue (penis size...generally) or don't care about (very deep scars). I completely agree with the fake it until you make it advice too, or barter, you keep the outfit on, you get something in return (either treat yourself or partner treats you).