To quickly answer that, people definitely noticed when I started dressing better, and I received many positive remarks and a few negative.
Some of the more telling comments:
A friend: "Nice shirt... you know, I try not to judge, and that's why I hung out with you, but you're really looking better after your fashion project." To me, this hints that I was being judged (for years?) by this person, even though they're my friend.
A family member: "Those are really nice boots, where can I get those? They're almost work boots... though far too nice to be wearing out here in the woods! And those jeans.. be careful, that shade of denim can bleed onto white shirts like that, trust me, I know all about fabric." This is from my Aunt, who creates many bespoke shirts for her family, and has worked in craft stores for decades. Tellingly, it was just Levi's and Doc Martens (both classics), with the proper colors and fit.
My boss: "You know, when I first I saw you, I thought to myself, 'I hired that?!' But you really cleaned up well." I had a phone interview for the position. This says to me it's very likely I would not have been hired due to looks alone, but that I had improved to hireability, allowing them to justify the action.
My brother asked me for advice, though he realized my 'transferred wisdom' method of learning, and asked 'How would your fashion forum people judge this look?' instead of asking for my personal judgment.
A negative remark I received was that I seemed to be dressing more like a person in a TV show, with the suggestion that I was exceeding my current reference class and conforming too much with the popular view.
What fashion forums have you used?
Yesterday I attended a meetup where the discussion turned to fashion for a time (because apparently the mini-camp participants were given some instructions on fashion as a useful part of instrumental rationality). (Unfortunately none of us knew much about the topic so the discussion turned into "how can we find an expert to advise us for minimal cost?") It was mentioned that dressing "badly" can be a useful signalling device, and some examples were given. Here's an attempt at a more complete list of possible signals one might be sending by dressing "badly".
The idea here is, if you do decide to start dressing "well", know what you're giving up first. (Of course you're also giving up possibly implying that nobody taught you how to dress and you're not sufficiently strategic to have thought of learning it yourself. Or implying that you don't have the mental, financial, and/or social resources to keep up with fashion. A lot of signaling depends on what your audience already knows about you, or can infer from your other signals.) See also Yvain's related post, Why Real Men Wear Pink and comments there.