Custom On-Demand Clothing

Can one do for clothing design and manufacturing what lulu.com has done for publishing?

How does Mountain Equipment Co-op (MEC) design and manufacture its clothing?

It looks like someone's tried to do this already, but the site doesn't seem fresh. What's the story?

Motivation: I've got a hoodie that is a bit more dressy, and less sporty than others. I have a drafty house and use it in winter. The monk-like cowl is part of the appeal. I'd like something similar that's more like a 3/4 length tunic, with a sash. Maybe a lighter one for indoor wear, and a heavier one for outdoor wear.

If I could design it, where could I manufacture it? How can I give my designer friends the ability to do low-volume production cost-effectively?

I've bought shirts from Threadless, and there are companies that do corporate-logo stuff, but I'm talking about being able to actually submit designs for stuff other than tees and shirts. What software and interchange formats do people use for this?

If this is silly, it would be useful to understand why.