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Also, be aware that in this global economy, the IP does not always determine language (think travelers and expats). Be sure to keep an eye out on conversions and bounce rates on the redirected visitors. It shouldn't be a big issue, but it is something to keep in mind.

Don't create a page per key term please. Only create pages per intention. In your case, does the page you want to rank [plus sized clothing "xxxx"] match the intent of the searcher for that term? And is the same page as relevant for [plus sized clothing]. Are you the best answer for both terms? Is that page the best answer for both terms?

I don't want to sound negative but I highly doubt that. If you sell plus sized clothing on the national level, your homepage is probably the best page. If you are going for new styles in 2012, that should be a different page with just those styles. If you are a store or collection of stores in Boston, then [Boston plus sized clothing] is more your term.

Now after all of that, do know that typically using a broader term in addition to some modifiers is perfectly fine if it makes sense for the page. Don't take that too far, don't key word stuff your title tags or content. Know your keywords, use them, but don't abuse them. Talk to people, don't market to them.

They most likely launched both in hopes of getting US and UK traffic to their site. The sites are not identical and therefore they are doing nothing wrong from a traditional SEO standpoint. Now, I don't agree with their idea of having a .co.uk and a .com, they should be fine with one of those.

I am with Miriam, this should not be allowed, but I can see how it was missed by any algorithm catches.