Or that's bad, because all those kids who spent time looking good, didn't get as many compliments for their effort than they expected, or perhaps even deserved.

There are many caveats with judging people by their appearances, but complimenting someone on the part of their look they put unusual effort in for some unusual occasion, seems pretty healthy to me.

(Well, there's also the caveat that the rich ones will have better access to exquisite clothes to begin with…)

I think the point is more around the collective distraction of dressing to a formal (and for kids, unfamiliar) standard, rather than enjoying time with the people around you at a party.