Why I think this movie went all wrong...

I'd argue that Gregory fell in love with her before the transformation. Remember how he got dizzy in the restaurant when he had that moment with her. And then when he goes on his book tour he still tries to call her so many times, and he even cuts his trip short because he misses her so much.

The transformation is more for Rose than it is for anyone else. She did it because of her insecurities to do with her mother as you say, and her sister. I think when Gregory avoided having sex with her and told her "I made sure there was no physical attraction", she took it to mean that he found her ugly, which isn't what he meant. He meant that he was afraid that sex would mess up what they had going.

After her transformation, she gets the attention of Alex, but then she realises it isn't real, that he is only attracted to her new physical appearance. She ends up with Gregory who tells her he found her beautiful even before the transformation. "That night in the room I wanted you so much."

In this sense I think the movie still succeeds in showing that true love is more than physical attraction, it is about two people that are compatible at an emotional and intellectual level the way Greg and Rose are. Her makeover only serves to show that she can attract Alex but that it isn't all that it's cracked up to be, because that deep connection is missing.

However, I still do agree that the makeover undermines the message that true beauty comes from within. I think if that were the real message of the movie, it would have been better if she had no makeover and if Gregory fought for them to have a wholly fulfilling marriage because he solely missed Rose (which I think would have happened anyway, he was so adamant to get her back without knowing she'd had her transformation). I would have loved the film more if it had been that way. But alas as you say, it's more of a Barb pic to show she's still attractive. You should check out the thread "the movie has TWO faces" there's a good long discussion there about the point you make here in your post.