Wearing costumes can be fun for some little ones, but typical costumes tend to be a bit hot, often uncomfortable and depending on the design can be to unweilding to be practical for all but the most dedicated "dress up" fans. I often see unhappy Princesses and wonder if the child wanted to dress up or if it was Mom's idea (or maybe Aunt's idea).
When my girls were about 3 or 4 they went through a phase of wanting to wear their dressup clothes everywhere.....tears when I tried to change them into "real" clothes to go on errands....I indulged them when it wasn't going to be a problem (who cares at the grocery, bank, library.....but not sure the church folks would have understood, etc). Thankfully it was rather short lived as they started realizing the limitations of moving around in dresses longer than they were tall, lol. But there were days in our Arizona summer that they had on velvet-like costumes and I was worried about the heat being too much, they didn't care, they were Princesses, but mom was worried, lol.
I imagine that if we were Disney-fans back then, I'd have not thought twice about letting them dress up for Disney......but if that phase hadn't happened, I doubt that I would have tried to force them to wear dress up just for Disney. As you can see from my ID photo, they now have their own "dress up" style for Star Wars and they have similiar outfits for Disney too. It's actually rather popular for both children and adults to have "special" clothing for Disney, but not serious costumes (search Disney Bounding for examples).
I would imagine that OP's sister suggested it for the cute factor....and the attention a cute little one in costume gets at Disney.....Guests will awwwwww a lot, Cast Members will call them princess (which makes the child beam most times), characters will make a fuss, etc. Vacation photos have an extra ounce of cute.......but if your child isn't comfortable all day, I guarantee the non-photographed times won't be cute.