I don’t know how Episode code/create their models/skins so it’s hard to say how they could do it, but I’m pretty sure they already have some kind of layering system going on. 
My guess would be that they reuse and change the meshes/skins they’ve already got and that’s why some pants go inside the boots and others outside. And why it’s so hard for them to fix these issues past release.
But you’re right that it’s probably not a small or easy project, but I don’t think it’s impossible.
Should they succeed however then that would give a completely new depth to the character/outfit creator and give so many more oportunities to ways of clothing without the team having to create as many items.
But I’m still supporting the idea of new pants 