Today infants up to early toddler stage are still dressed in very short ensembles with matching "underwear". So long as they are still in diapers, it's considered ok. Part of the reasoning is just to keep longer skirts from tangling and tripping them up while still allowing easier changing than pants would give. That potty training point, as Shryke1 mentioned, is the turn over for allowing boys to wear pants as well.

Specifically for Shirley Temple, she was out of that age range, but her entire characters point was to embody being young. It was a costume choice to keep her as infantile as possible. Remember that those little knickers she wears we call underwear look nothing like what adult women wear as underwear in the time. So, there's not the sexual cross over we associate now.

At the time the country was easing its rulesets regarding personal modesty. This occurred after WWI until the beginning of the great depression. Then the rules hardened with the times. Shirley Temple was an exception. For two reasons, she was in holywood, and film fashion is always a little off from the norms, and second pedophilia did not get the press it does today.children dressed like that because it was easier and cheaper to dress them that way. no one (outside of pedophiles) would have considered her sexualized.