There is a fabulous tutorial on Craftster on how to change a man's button down shirt into a toddler or girls dress.
I have made two so far (yippee). My older daughter insisted I finish her dress this morning so she could wear it to school (mommy - you promised me I could wear my new dress today). I'm sure the hem isn't even but she doesn't care. Will post picture of younger daughter in her dress - if I can convince her to wear clothes.
Oh and Pop Pop - Thanks for the shirt. Lucy LOVES it! The big purple circles are her favorite (she says so).