Create a new character and apply any custume/prop to it. Use the "Hide Body Mesh Tool" to hide all of the character faces. (This is something I do with a full-body suit.)

Now export to FBX, and use InstaLOD to create LODs.

You'll find that the resulting LOD meshes include a mix of the outfit and the character's model, even though all character model faces were hidden.

This only occurs if every face on the character is hidden via the "Hide Body Mesh Tool". If just a single face remains visible, InstaLOD behaves correctly, and doesn't include the hidden faces.