OP you have my sympathies. I think it's very easy to lose your way after having DC's, some much of your time gets taken up concentrating on them, that you forget about yourself for so long. However, it's a really positive thing that you want to do something about it and that you feel you'd have a confidence boost if your felt more 'pulled together'. That's a great start, rather than giving up and saying "sod it". 
Something that has been discussed here lots is using the outfit/occasion method for sorting out your wardrobe.
Write down a list of occasions that you have on a regular basis. They can be as every day as you like. Examples would be:
Taking DC's to the park
Coffee with friends
Pub lunch with family
Toddler group with DC's
Dinner with DH/DP.....hopefully you get my drift.
Now think about what you would like to wear when you are doing these things. Get inspiration from magazines, but most importantly look at other women out and about in RL.
Some items will cross over into different occasions, often jeans, a blazer, ballet flats etc. These are the things you should aim to spend a bit more on if you can.
I second the make up counter idea, especially BB, they have some lovely make up kits at the moment. Tell them you want a every day quick routine that you can polish up a bit when you go out for evenings.
Also agree about the underwear situation, I think you'd feel better if you get that sorted first too.
In terms of stores that I think might be good for you to have a look in or browse online I'd say:
Zara - (Good for blouses and tops, blazers and knitwear. In fact my favourite cardigan is a long lined navy one for £20 from Zara. Washes well, never bobbled and looks good with dark jeans and a simple white T-shirt)
Whistles - (Very good for T-shirts too. They are cut very well, and because of this I think they allow something as simple as a T-shirt or a basic jersey top to become much more dressy...very flattering necklines)
M&S - (Autograph range has some good winter day dresses, usually in a jersey fabric. Would look good with black opaque tights and biker style boots. Also I do like their cashmere, good quality for the ££)
John Lewis - (I'd go back there for Jeans, as you will have a big selection. I'd try Levis curve, Seven for mankind, Oasis - best high street jeans, Mint Velvet)
In my worst style days, my easiest outfit is dark jeans, white scooped neck T-shirt, and a long line cardigan. Top with a big thin material scarf (Warehouse are good). Make up, base, eyeliner, mascara and a bit of lipstick. Not the most fashion forward outfit, but I feel smart and 'done' if that makes sense.
By the way, my DS has multiple food allergies, I totally understand how hard it is to come to terms with and manage. Have you popped onto the allergy boards here on MN? There are some wonderful posters there, who give fantastic advice and support to each other. My DS is the same, seems to be getting more allergies rather than growing out of them, it can be very disheartening.
Hope this helps in some way though.