A certain Rolf Potts has written an interesting article on the pleasures and perils of dressing like a native while traveling or living abroad:
…going at least partially native has always been an important step in experiencing other cultures. After all, it’s difficult to truly explore your host country if you don’t eat the local food, brave the local hostelries, and take a stab at the local language. Wearing native clothing isn’t necessarily a prerequisite, but abiding by local dress codes (particularly in regard to modesty) is essential if you want to be accepted within the cultures you visit.
As the article admits, however, donning local attire can lead to ridiculousness, as President Bush learned in Chile back in 2004.