She was a beauty pageant queen, that's why they have pictures of her dressed like that. There are a ton of parents who dress their kids up in hopes that their beauty will win them something.
Also, he has not been released yet. The Boulder Creek County District Attorney's office dropped the charges against Karr because of the DNA evidence they used. He is NOT a free man yet.
Personally I don't think anyone will really know who killed her. Karr was a very convincing suspect, as he knew a lot about her, maybe too much. However, his version of what happen and how she died conpletely contradicts what Boulder Creek Police found at the murder scene. So for all we know, he could've been a total nutcase who was just obsessed with the girl, or he really could've been the killer. As for her parents being suspects, some will agree and some will disagree. This case will probably be cold for a long, long time.