3) I also understand that this is certainly not a new phenomenon ; in fact being MORE tznius is the newer of the concepts - just look at old weddings with gedolim in them and the women have short sleeves. I wonder if the people then had the same goals and values as the modern orthodox community has today or did they just not know of a different lifestyle? I know my grandmother dressed like that then and she certainly wouldn’t be called modern nowadays , not at all.
In order to understand this "snapshot in history" we need some historical perspective. The grandmothers 50 years ago were parents approximately 70 years ago and "teenagers" a few years prior. That means, the vast majority of them did not attend the fledgling Bais Yaakov school established in 1941. The same goes for their husbands; although there were some Yeshivos, many could not afford to send there or did not see the importance of it. They went to public school and if they were lucky, they had Talmud Torah in the afternoon (although many who did, did not consider themselves lucky). By the time they left school, they were essentially part of the American culture. Therefore, even the "Orthodox" struggled with the basics of Judaism.
Nonetheless, when it came time to send their own children to school, they were able to understand that a yeshiva or bais yaakov was necessary for the continuity of the Jewish People. These children came home from school with "new" ideas about yiddishkiet and halacha. Although some parents were willing to listen and make changes, many could not accept that they were lacking in the observance of the torah they tried so hard to keep.
So the question remains, why didn't the rabbis protest the rampant violation of halacha in their droshos in shul? It would seem that the answer is that they felt they had to pick their battles. Tofasta meruba lo tofasta. So they initially chose to only discuss Shmiras Shabbos, Kashrus, and Taharas Hamishpacha in addition to marring Jewish. Later, they began to address the more blatant violations of tznius such as mixed swimming. But as the masses were so part of the american culture, they did not think tznius with all it's exacting alachos was a winnable battle at the time.