I think you have the right idea, Maastricht. The Metropolitan Museum of Art’s commentary on that statuette says it depicts a professional entertainer of Alexandria. Its explanation of her costume says “Sweeping diagonal folds explicitly convey her movements… its enhancement of the voluptuous movements of this dancer suggests its ability to convey meanings beyond a dignified propriety and modesty.”
In other words, the purpose of the big wrapping is to look more rather than less sexy. How?
Speaking from the perspective of Middle Eastern dance, which I have some experience with: That woman’s costume shown in the statue used a himation, which is a large sheet of cloth. You can see, from the way the himation drapes over her skirt, that the material is very thin and clingy. It reminds me of the thin silken veils used by belly dancers, who use the ability of large sheets of silk to move sensuously in many ways. They can wrap the veil around themselves, let it float around them in the air, or draw it luxuriously over their bodies to reveal their shape underneath by its slinky movement.
Alongside this, I’m thinking of the use of a large chador-like wrap, like Tamar playing the harlot, or Roman prostitutes who wore togas, to identify women of low repute in ancient Mediterranean societies. Dancing girls were not always distinguished from prostitutes in social status.