I found these links about turning a button down shirt into toddlers dresses. Then someone went another step forward and made capri pants out of the sleeves. These are absolutely adorable and I wish I had a little girl to sew for. But alas, I don't so I'll pass this on to you in the hopes that you can use it.
Turning a Shirt into a Dress Tutorial
Making the Sleeves into Capri Pants
A cute example
Another cute example