With custom clothing (which includes all main characters 'alternate' costumes in the home game), everything but the bra and underwear can be destroyed. Period. Female characters' bras and everyone's underwear is pretty much undestroyable.
It flat-out states that in the wiki, linked and quoted above. I've seen it happen in the home game, Xbox 360, North American version.
What you are showing in your video is what I stated here:
"Their primary costumes only tear up, showing pre-rendered 'battle-damage'."
Any secondary costumes that are made of the custom character armor can be completely shattered down to underwear only. Any Custom Characters you make can have their clothing broken down to underwear only.
Just like it states in the wiki.
Have you only played the arcade version, where one can't make up the custom characters or use the custom armor with the main characters, or do you have the home version?
If you're willing to put up with sitting and watching them smash away at each other...or just skip to the end. There. Cassandra and Hilde - playable characters. In clothing, not armor - dresses, skirts, that kind of thing. And then the clothing destroyed. Down to underwear.
And down the side of the youtube are a bunch of other vids no doubt showing the same thing.
So much as I didn't want to start posting that kind of stupid stuff, there it is. Videos showing it straight-up, and the confirmation from the wiki.
Characters in Soul Calibur can get their clothes blown up down to their underwear.
wasn't necessary, and makes the game flat-out embarassing to play.