It's a toss-up between realism and artistic licence, and Blizzard seem to have gone for the latter every time. While I don't personally mind the chainmail-bikini wardrobe, I know of players (especially those who RP) who aren't keen on it at all, and others who purposefully dress their Night Elves in Black Mageweave Leggings for fun.
What's your stance? Do you seek out or avoid skimpy armour? Any particular favourites?