Yes - Is is a part of the game, should be allowed everywhere.
I don't participate too much in PVE, primarily just PVP. From my perspective, if there were no costumes in Cyrodiil, there might as well be no costumes in the game.
I don't believe it's that important to know exactly what kind of armor someone is wearing while you're fighting them, but without removal of softcaps, hybrid builds are much less common.
If you see a player in skeleton costume using lots of magicka abilities without running out of magicka, he just might wearing light armor. The guy in the wedding dress dodge rolling all over the place, he just might be wearing medium. The draugr with 32k health just standing there holding block and tanking people without doing a lot of dps, probably wearing heavy.
.
Why all the sudden the drama about costumes, they have been around since the first person got the quest to get the maids uniform or whatever it was called and then when you got your first vr costume.
Yes - Is is a part of the game, should be allowed everywhere.
It doesn't effect PVP in a negative way so there's no reason to make them PVE only. Plus its nice to hide behind the skeleton or other ones like that as a vamp so its not just like," HEY LOOK AT MY WHITE SKIN AND BLOOD RED EYES!" I mean it doesn't protect me from the skills that ruin me, but it at least gives me some kind of buffer so I'm not being berated by those skills all day.