The arrows besides the armour portraits on character creation work (well, one of them does), so you can indeed give your lady characters more armour.
Actually, by switching to the clothes that cover "more area" during character creation, you're actually reducing your armor rating and losing slashing/crushing/piercing resistances. The Source Hunter tunic the Warrior's start with (the one that shows the most skin) offers the most protection. If you put the Warrior in the Ranger or Wizard outfits instead, they're actually wearing inferior armor (protection-wise).
However, I want to touch on the original poster's complaint about less armor offering more protection. Yes, true enough the Ranger and Wizard starting outfit do cover more skin while curiously offering less in the way of protection. However, we could argue that the reason they offer less protection is because (despite covering more area) the material used on these two outfits is less suited to padding and protecting the wearer from injury. And, I think, that's a reasonable explanation that makes sense.
I obtained better (metal) armor while fighting outside Cyseal and (in addition to greatly boosting my protection) it actually covered more skin, not less. This seems to be exactly the opposite of the complaint. Now, I suppose it's possible that later on even better, more protective armors may start revealing more skin.. but so far I haven't seen it. And even when I do, I'd probably just chalk it up to the curiosities of magic and/or the fantasy genre.
