That's my problem with the costumes as well. It isn't a matter of coverage - they do cover more than some bathing suits I've seen marketed to young girls. But they are very clearly designed to look like miniature lingerie, which I find to be completely inappropriate.
It was on GMA, but they showed the routine in two different segments. One was just where they were having one of the hosts and a couple of guests talk about different news items of the day. But earlier in the show they did a segment about this controversy and they interviewed two of the parents. The parents came across like complete idiots. One of them kept saying that it wasn't intended to be on youtube - that it was only intended to be seen by those at the competition. They didn't really address the specific concerns that people have about the routine, they just kept saying that the outfits provided adequate coverage and the song wasn't objectionable, and that
the routine wasn't intended to be viewed by so many people.
As far as the song, I do agree that it isn't particularly objectionable. Some of the ones mentioned in this thread I find much more shocking. "Leave Your Hat On" is about stripping. "Hanky Panky" - at least they took out the part about spanking, but they left in the line about bondage and even had a girl mouthing the words.

"Soulja Boy" . . .

Seriously, what idiot came up with the idea of using
that song?! There's really nothing wrong with the Beyonce song and I bet the girls could have done a perfectly age-appropriate dance routine to it. . . if they hadn't been dressed like little exotic dancers and been gyrating like them as well.
It saddens me to see that parents don't have more sense than to let their children participate in something like that. Children grow up, they don't stay kids forever. There will be plenty of time for more suggestive outfits and routines as they get older. There's absolutely no reason to allow or encourage young children to behave like miniature adults,
especially not in a situation like this dance routine.