Here's an edit since I'm not usually the best at explaining with words: (you can ignore what I did with the background, I was just messing around)
You've got the right idea with the cloth, although I would say so the opposite of what you proposed. Don't increase the value range, decrease it. Too many values can make something look much much more flat than if you only used a few.
For the folds in the cloth, I'd say grab a sheet or something and wrap it around you to see how it interacts with your leg. The best way to learn how to draw something is to study how it actually looks. I think it would drape down between the legs and be more flat where the legs actually are because they would be touching the fabric. The most important thing to remember about folds in cloth is—where are the convergence points?
For this piece, the convergence points would be her hips. This is where all of the folds will converge and end because there will be something pulling it taut. We've got where the cloth should end now, but to actually do anything with that, you'll need to find a path for the cloth. I generally take about two or three main paths for the folds in my pieces because too many can make it look all muddy and not very good. By path I mean a kind of skeleton for your folds that just kind of tells you what this cloth is doing, and what places should be shaded or given highlights; the shadows and highlights depend completely on the lighting, material, and your own preferences. You can determine the path of your folds by where the gravity is pulling, and where your convergence points are.
Here's a little visual; green is the paths, red is the convergence points:
Also, while I appreciate your sneaky covering, her breasts were a bit too high up on her body.
