What do you mean by overweight and possibly obese? Is she able to buy her clothes in high street shops?
"Flattering" invariably means clothes that make people look slimmer because the beauty standards so saying she should wear more flattering clothes will just read "clothes to hide your body shape because you're fat and gross and no one wants to see you".
If she's asking "do I look fat in this?" it's OK to say "it doesn't look like you're very comfortable in it.
If her clothes no longer fit because she's put on weight, it's also OK to confirm that she has gone up a clothes size so let's get some clothes that fit you better.
I've been a size 10, 12, 14, 16, 18. I've had clothes in sizes 8 and 20 because some shops are mad like that. I was a size 14 for some of my teens and early 20s and felt like an absolute whale and that I was disgusting. I've been an 18 in my 40s and looking great and healthy and fit on it (running regularly, weight training, eating a balanced diet, I'm just short and peri-menopause).
To you, does fat = ugly and thin = beautiful?
A lot of "I'm worried about your health" tied up with size and weight is often about "I'm worried that you look unacceptable in a society that values and celebrates skinniness". I've been healthier at a size 16 than a size 10. I've also been healthier at a size 10 than a size 14.
A big mindset shift came for me about 7 years ago when I stopped any engagement with the diet industry. It made me feel shit about myself. I focused instead on moving in ways that make me feel good, and eating well not less.
If you think your daughter looks awful in a certain outfit it's OK to say "hmm, I think I prefer that new green dress you had on the other day" or "maybe the t-shirt would work better with your dungarees?" or "you looked amazing in that top and shorts last week, maybe try that top with this skirt?".
You mention that she's "quite unhappy generally". Is she in work or education? I have a child the same age and it's a tricky time for comparing what peers are up to and the pressures of what success looks like and what kind of life journey they're on.
Depression will pull focus from everything, her lack of motivation to be active is a symptom of that. And your observation that her eating habits are linked with low mood is completely recognisable to me. When I eat shit because I'm stressed and sad, it makes me feel worse. When I get myself out for walks and jogs and dance classes I feel better. When I'm eating fewer snacky biscuits and crisps and drinking less alcohol I sleep better so I feel more awake and energised in the morning. Learning all of that and listening to my own body has worked best when I completely removed any thinking about clothes size and weight from the equation.
Weight Watchers and Slimming World completely fucked up my relationship with food and exercise. Finding ways of moving and enjoying good food saved me mentally.
I also have friends and relatives who have been in a similar situation to your daughter and their way forward came about after receiving PCOS diagnoses. Understanding hormones made all the difference to them.