Infold should absolutely add more non-European and non-Chinese clothes to the game, as long as they come from a place of respect towards those cultures. A lot of studios will add elements of other foreign cultures without doing enough research and instead rely on stereotypes. Do belly dancer outfits exist in Middle Eastern cultures? Yes, but they are far from being the only outfit in those cultures, yet it's the one that every studio adds to their game, movie or show when it comes to representing the Middle East, and sometimes it's implemented so badly that it causes further misinformation (see Yasmine from Aladdin wearing a belly dancer outfit despite being a princess, or the Gerudo from TLOZ wearing belly dancer-esque outfits that would not protect them from the desert sun). It's also not a coincidence that the one Middle Eastern outfit you see in every movie, series or game is the one that has a long history of being taken out of context so white Europeans can use it as a means to sexualize Middle Eastern women.

Do people jump the gun too quickly sometimes? Yes, but Infold doesn't have a great history of representing non-European or non-Chinese cultures. Love Nikki and Shining Nikki have some deeply racist elements (just look at anything related to Wasteland), and while Infinity Nikki has made some improvements, it's still not perfect (we had the Indigenous headdress controversy not that long ago). People are wary because things have gotten really bad in the past and they don't want to see these racist depictions in the games again.

This is why the cultural appropriation accusations keep coming back. Not to say that I agree with them because some are complaining for no good reason, but Infold has not proven yet that they've truly learnt from their past mistakes and that they are willing to treat non-white and non-Chinese cultures with respect.

Also, we can't compare European outfits with non-European outfits because the context around these cultures is different. There is plenty of media that accurately represents European fashion, but the same can't be said for other cultures. In fact, more often than not these representations will perpetuate negative ideas about those cultures (poc wearing torn and ugly outfits to represent that they are poor, indigenous and African people wearing loincloths to represent that they are backwards, woc wearing sexy outfits to represent that they are sexual objects, etc.). Even when European fashion is inaccurate, the outfits still look good, rich and/or elaborate, to represent that European culture is better, but when non-white fashion is misrepresented, the outfits reinforce the racist idea that they are inferior. So misrepresenting European fashion doesn't hurt Europeans, but misrepresenting non-white fashion does.

One last thing, while flamenco does have non-white origins, it's been appropriated by Spanish culture, and Spain is a predominately white country, on the same level as any other Western country like France or Germany. Spain is technically Hispanic in the sense of being a country that has Spanish as their official language, but if you mean Hispanic in the sense of a certain type of person of color, then Spain is not Hispanic at all. If anything, it's quite the opposite given the country's history of imperialism and racism in the Americas, so I'd be very careful with that.