I have uploaded three photos - they're supposed to be three different ones but MN seems to keep turning previously uploaded pictures into copies of the latest one?! Confused!
Anyway, on my profile there should be a pic of the inside of the top showing the zigzag stitching on the elastic. I did this by having for example a 40 cm wide piece of fabric, marking with pins every 5 cm across the top, then pinning a line of elastic at each end of the fabric (so it was taut) and then marking with pencil on the elastic where the pins were. You then zigzag stitch the elastic to the fabric by pulling it taut to line up the pencil marks with the pins.
Check out FlossieTeacake's blog - she has a great shirring tutorial. here
As for the measurement. I would definitely go by your DD's personal measurement. Shirring is meant to reduce the fabric by half but I don't find it reduces quite as much as by half. Possibly between 1/3 and 1/2!
For a 3 year old, the average chest measurement is 23 inches all round (laid flat 11.5inches from side to side). Using this as an example, I would make the finished shirred piece a bit less than that, ie laid flat probably 10.5-11 inches side to side, so it stretches a bit when it's on but not too much. Although shirring is very forgiving and feels tighter to the hands than when it's actually being worn IYSWIM.
Best to do is shirr your fabric, then sew it with big stitches (the tacking stitch on the machine) where you think it should be, and try it on her before cutting the excess fabric away, sewing properly & finishing the edges.
Also, for a nice finish I would: do shirred lines around 1cm apart, and draw the lines on in advance (if you are not good at keeping lines straight) as you will to draw lines on the right side of the fabric as that's where you would be sewing, so would need to use a fabric marking pen that removes easily and test it thoroughly before use
Finally, do the tiniest top hem you can, as an over large frill (created by the top hem) doesn't look as good as a small one, IMO. Start smocking on top of the hemline, rather than leaving a gap between hemline and smocking. HTH!
you have to fit the top to her slim figure, so reduce the pattern.
yes, it should be a snug fit, so you have to reduce length of elastic too, but remember that the fabric will have a thickness to it due to the gathering up effect, so you don't want it to be too tight either.
can you construct a simple "boob tube " with some left over fabric of similar quality, that is smocked, to figure out the best fit?
watch the semi final episode of " The Great British Sewing Bee" - they are making a smocked dress and you get great tips on how to do smocking!