UDPATE FROM 2023/04/05: A new version of this fix is available here: Vanilla Paperdoll & Inventory Fixes 2.0
It is probably no secret that there are quite a few issues with how character clothes and armour sets are displayed in Daggerfall. One of the most obvious things are palette glitches with certain female human armour pieces. In fact, the human clothes and armour (including the non-transparent chain mail in question) were developed later, as the date stamps on the respective texture files suggest (the retail versions most likely have lost original date stamps in the process of CD burning, but Bethesda's Internet demo version retains the date stamps).
The wrong colours on the chain mail are only one of the problems with clothes sets in Daggerfall though. It appears that at some point, female characters of all races had the Argonian clothes set (evidence for this can be found in the early demo v0.1), even though elves and humans both share a body shape that is completely different from that of Argonians, and even the Khajit female body shape is slightly different as well. The developers partially fixed this discrepancy with human clothes and armour, but those are not used for the elven females (in spite of the body shapes of human and elven female characters being identical), and also have other problems.
I've attempted to clean up the glitches in the clothes and armour sets by fixing the palette, realigning the images and introducing (mostly) minor edits where necessary. I guess I've missed some issues here and there but the most glaring ones have been fixed. Here are some examples for comparison:
Spoiler:
To install, simply unpack the archive contents into the ARENA2 folder and overwrite old files where necessary.
The following editors were used to modify the game files: ANDYPIC, GrafX2.
