I was very excited when I installed NPC New Clothes (NNC). Thousands of new outfits, and every single one of the 1000+ NPCs have unique outfits suited to their class or occupation?
Unfortunately, I found it a bit immersion-breaking. There were too many skimpily clad women (Fighters' Guild members with armored bikinis? That's not very functional...) and goth style guys.

So here's my questions...does anyone know of any mods that tries to do the same sort of thing (increase the variety of outfits used by NPCs) without getting too crazy?

Oh I don't know, immersion-friendly as in "ready for a dip in the pool" ?

Sorry, and yes, I do know what you mean and in fact, sympathise to some extent. There is a similar mod (or maybe more than one) for Fallour 3, with exactly the same "problem" (for some).

Count me as interested in a solution as well.

You two might be interested in http://www.tesnexus.com/modules/members/index.php?id=534078 then.
I don't know about its current status, but there were quite some modular releases already when I was still able to actively play.