Custom character meshes (from base) and their clothes?

Hi there.

I've heard that it's pretty tough to do mesh edits while the game is running, and it seems using bones somehow is the way to do this at the moment. I was thinking of a character putting on subtle muscle tones over time (like San Andreas and pumping weights), but nothing sculpted. Think low poly muscles that get bigger over time. Stomach, arms and shoulder sets mostly. If this was even possible, how would you dress the character? The clothes wouldn't fit to the mesh properly, right? You'd need to apply some kind of component which was applied to the character mesh to make the verts deform in the same places. Is this remotely possible though?

Any clues would be great. I'm pretty content with limitations, I'd just rather know them than not ;]