A.) Of course its ridiculous

Plenty of people do it!
B.) A photographer with experience working with animals should have very little problem with it.
C.) Could be. The biggest chunk of change for a professional photographer usually comes from the sitting fee. It will be more if you have them come to you and less if they have a studio you can go to. If you find a couple other people who also want photos done, you may be able to negotiate a lower sitting fee (split up among a couple people). A lot of photogs are working digitally now so film charges are gone and so is the guess work (they know immediately whether the shot needs to be taken again). Prints are pretty standard costs whether its Sears or an independent.
D.) Check the yellow pages and Google. A lot of photogs will have web sites. You definitely want someone with animal experience. A wedding photographer will not get you what you need. Some photogs will charge by the hour for sitting so the better they can handle dogs the cheaper for you
E.) Well,
I wouldn't spring for photos (my wife almost certainly would) so
I wouldn't dress them

BUT, if
you're going to do it, do it big! Take shots without the outfits, with the outfits, shots for Chritmas, etc. Do it while you can!
F.) Yes but isn't that why we're all here?
Tom