It's totally normal. That's the age where kids start to pick up on 'toilet jokes' and thinking words like 'poo' can be very funny. It will run it's course, the best advice I can offer is to take it in your stride and not over-react!
Your DD's interest will eventually fade, just go with the flow and do what you feel comfortable with. I would have suggested a cropped singlet top too - I mean, nobody is going to see it under her clothes, are they? I agree with you about not wanting toddlers to wear inappropriate clothing.
I seem to remember my girls were around that age and wanting to wear 'showgirl' clothing. I got them some sparkly bikini-style underwear and told them that they were for dress-ups only, that they could wear them around the house but not out. That satisfied their desire to wear a bra-style top, but put limitations on it that I was comfortable with.
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