I think Marlene is right, your so-so feelings towards his mother are probably being further projected on to how you feel about your nephew's unkemptness.
I understand where you are coming from. I get so irritated when my sister brings my 3 yr old nephew over in the same clothes all the time, I could of sworn last summer the kid only had two outfits when I KNEW I had given her two 40 gallon trash bags full of old stuff of my sons.
But I know my sister and I know when she does laundry every day or two, she is simply grabbing whatever is on top of the clean laundry pile and dressing him in it. If I really want to promt her to put something else on him, I put him in different clothes and send him home with the old ones in a bag and with new ones on, and I don't say a word. At the end of the day, what I say makes no difference, he isn't my kid. But because she is my sister, lo and behold, I'll see him a week later with the outfit I had put on him the week before. Why? Because it's on top of the clean laundry pile.
And sometimes, I am guilty of the same thing.
I understand the frustration, but like the other moms said, I know he gets bathed, I know he's loved and I know he's fed well so what does the rest matter? They are just clothes; if he grows up gay and wants to wear pink and purple shirts every day or become a cross dresser I won't love him any less or mind a bit! AND I will still go out in public with him :)
Besides, I know he's young, but don't you have a pair of jeans or a shirt or both that you just LOVE and refuse to get rid of and still wear when really you shouldn't? I do! My fav pair of jeans are starting to get holes in the butt of them they are so worn, but I swear I can wear them for another few months before I have to give up. And I have a Beatles T-shirt that so needs to go in the garbage (and a pair of AC/DC underwear that are juvenile but fun) but I love it and wear it to bed frequently.