Sure why not

, esp for little ones if it is cool underwear that had Barbie on it, or Spiderman or something. And then for the teens, um definitely when the prices at places like Victoria's Secret and stuff cost so much. I got underwear and bras from VS all the time when I was a teen, I LOVED it!
DD is getting underwear in her stocking...she always does. She loves it. I think my kids would be disappointed if they didn't get their "practical" gifts in their stockings.
This is YOUR concept! And as many have pointed out, getting clothes for kids is not that far fetched or unique either. As a kid Grandma got me the cool Jordache jeans I was begging for, or that Benntton shirt that my mom could not justify paying $80 for. Or when I was little that frilly dress that just looked so cool when I spun around.
This is true. It's obvious by this that not everyone thinks giving clothes is a heinous crime. Maybe the OP's inlaws see clothes as a fine gift.
I have gotten nieces and godchildren clothes (all girls) and I try to buy them from one of the trendy places, they certainly seemed grateful and I always provided gift receipts just in case they had too many purple sweaters or I missed the mark on taste or size.
I could maybe sympathize if your SIL did what my does/did. She want nothing to do with us but sends Christmas gifts...ok, but she has no idea what my kids are into or their sizes. She would send clothes that were way too small bc she refused to ask anybody, and she bought them at the outlets (perfectly fine btw) but she would rip off the tags or not give me agift receipt so I could exchange them for the right size. It was hard one year explaining to DS why he couldnt wear the fire truck tshirt, he loved it, but it was way too small, and the Gap would not let me exchange it bc she bought it at the Outlet and I didnt have a receipt on it.
And my boys have loved clothes more so when they have there favorite team/player or charcter on them.
I also teach my boys to be grateful no matter what, but they have slipped up at times, like saying they already have something but we use that as a teaching moment to try harder next time