The existing answers and comments explain the situation quite well, but for completeness I just want to add a picture of what is evidently the model for your wife's costume:
Practically every detail matches. This costume is currently on sale for 17.85 USD at AliExpress, described as "Womens Sexy Beer Girl Maiden Oktoberfest Bavarian Halloween Dress Dirndl Costume". As the description makes clear, it's a sexy Halloween costume based on the Dirndl. You can contrast this with the images of actual Dirndl posted in other answers.
For comparison, here's a nurse's uniform on sale from the same supplier:
So, it really is as Jan and others have said: your wife had the misfortune to model her creation very closely on a novelty "sexy" version of the traditional dress, and it stands out in much the same way as the nurse's uniform above would stand out in a hospital.