I think you ought to consider the possibility that she may, in fact, look as good as she thinks she does to people who aren't you. Husbands have been known to think far less of their wives than "the rest of the world" does. My friend (who died at 44) had a husband who thought she was just about the most unattractive person in the world. So many other people thought she was one of the most beautiful people they knew. Anyway, when she died and he was talking about the numbers of people who showed up, I said how well liked and admired she'd always been. He was speechless, because he'd never seen it. He's not the only husband in the world guilty of that kind of thing. It's just that the question brought my friend to mind.
However, I'm not suggesting you're one of "those" - only suggesting there's a chance you could be and don't realize it. :/ If you're not one of "those", why not just let whether your wife looks as good as she thinks she does be her problem - not yours. Because, when it comes down to it, I think you're right and sensitive not to want to insult her.
Besides, sometimes if a person feels good wearing something (or doing whatever it is that s/he believes s/he looks good doing), that may really be the only thing that matters anyway.