Lynne has every right to comment on what the lady is wearing. She is essentially wearing knickers and a plastic see through slip, although I'm sure it's sheer and the light has caught it like that. However, it may not be Lynne's business to confront this woman. She should really have approached the proprietor and asked whether the lady's attire is suitable for the dance.
The lady's mother is not that scantily attired compared to her daughter, but seeing the man she is dancing with, it would seem that she does have rather a low cut dress on for a woman her age. She does look quite young though which gives the impression that she gave birth to her daughter in her late teens or early twenties. Perhaps she is looking for some sort of sugar daddy to fund her and her daughter's extravagant lifestyle (of going to dances and buying revealing outfits).
George meanwhile is as embarrassed as when his wife strips off on a boat to get past a crusty old admiral. Lynne is a hypocrite, although to be fair, she really only goes topless at private parties and in the Mediterranean.