I think a well cut long (knee length) shirt actually cuts down on the “baggy” effect by limiting the volume of the gharara. I’ve seen ladies in the old fashioned farshis, and they don’t look very flattering around the hips if they’re worn with a short kurti/shaluka.
I actually liked her daughter in law’s dress a lot more when I had only seen the first pic. I though the color palette was more of a dull rose & coral red, rather than the almost melon color I’m seeing in the second. Also, I’m not really a fan of the long lines of embroidery down the shirt, and the chatta patti border and sleeves. Also, I still think the sleeves are too long, and look awkward.