Clothing sizes are EXTREMELY difficult to deal with. I've studied this some and because women's bodies vary so much even just listing measurements like Bust/Waist/Height are extemely deceptive.
For instance, how would you pick the measurements for a dress like this?

It's fitted at both the underbust AND the waist. That means you need to have two measurements that are fitted to a women's body. However, in my
underbust survey I found that for women with the same waist measurement could vary up to 9" in their underbust!!!! That's a huge difference, so there's no way to accurately size a dress that's going to include everyone. If a women has a larger underbust than waist she might have to size up whereas a women with a smaller underbust may have to size down. So even though they have the same waist measurement they could look at a size chart and think WTF? This is completely wrong!
Another example is with pants. Someone posted about having a size 10 in the 120's. Sure, why not? If you have a very nipped in waist with wide hips it's possible. My torso is the complete opposite (very straight up and down) so I actually have to size down about 3 sizes compared to what size charts tell me because the differential between my waist and high hip- where pants actually sit on you- is only about 2-3" whereas manufacturers assume that it's 5-6". That being said I know women who have a 9-12" differential and they definitely need to size up. To see more look here:
http://braslessinbrasil.blogspot.com...ts-sizing.html
Now, as to the question of vanity sizing. It's a hard one. I'm getting to be on the smaller end of the spectrum. As is, I wear the smallest band of bras offered (28) and in many stores I'm a small (in terms of pants I'm a 4). However, I'm still 5lbs overweight and back at my lowest in high school (I weighed 20lbs less than I do now) I wore a size 8, never once a 6. Clearly vanity sizing is out there.
Personally, I'd prefer companies to list just the measurements that are relevant to that particular piece of clothing. It would take some brains on the consumer's behalf (and a measuring tape) but it would save a lot of $$ on returns from both ends. I'd love it if stores would offer to measure you for free, have a database of their clothes on hand and point out what might work for you.
For instance, an empire waisted dress vs. a dropped waist dress have very different needs in terms of measurements. So why bother with listing a waist measurement because neither one would be very accurate?
Now, the sizing out women issue is real, though, and is one that needs to be dealt with. I know of some companies that still have a larger selection for smaller women:
Pinup Girl
Collectif
BiuBiu
and what's great about Pinup girl, for instance, is that they list the individual measurements on each item. BiuBiu you can actually show by your bust size (which varies per size) AND they have different models showing each item of clothing.
That's really the way to go, especially as online shopping becomes more and more prevalent.