I could not agree more with your above statements.
Yes, Spain is going through very tough economic times, but most of Europe are too. We're not asking her to buy designer label clothing, but her dress at formal and important events is disgraceful. She was a professional woman in her past life; she knows how professional woman need to look. When the first lady of a country, who isn't particularly from a wealthy nation, dresses better than the host Crown Princess, this sends the wrong message to everyone.
Yes, she could be rebelling or "doesn't feel like dressing up anymore", but you know what? She signed up for this life of being a public person. She knew exactly what she was going to get herself into. If I were her husband, I'd be saying something to her, because at the end of the day, she is representing the Royal family, Spain and the Spanish fashion industry. Look at CP Mary, Princess Marie, CP Victoria. They all wear clothes designed from their respective country-person. Could you imagine them wearing hideous clothing, like what CP Letizia has been, day in and day out? I think not.