1) That it is a loose outergarment like a coat or cloak.
2) That it is a sheet covering the entire body except for the eyes.
Notice that neither of these opinions mentions "conservative clothing" or "loose clothing" nor does either opinion say "shalwar kameez are OK".
Section A: Verification that these are the two opinions of the scholars
Some well-known modern scholars who support the first opinion:
1) Shaykh Yusuf Qaradawi (Shafi'i) - see Women's Awrah - Qaradawi describes the jilbab as "a loose outergarment"
2) Shaykh Muhammad Nasir ad-Din Albani (Salafi) - Shaykh Albani had written an essay called "Women's Dress". Unfortunately, that web page seems to have vanished. He describes the jilbab as "an outergarment that is thick and opaque and covers the clothing under it and the woman's form".
Some well-known modern scholars who support the second opinion:
1) Syed Abu-Ala' Maududi (Hanafi) - see Introduction to Surah al-Ahzab - Maududi describes the jilbab as an "outergarment covering the face".
2) Shaykh Abdul-Aziz ibn Baz, Chief Mufti of Saudi Arabia (Salafi) - see The Danger of Women at Work - Ibn Baz describes the jilbab as "covering all of the body except the eyes".
Some webpages that support the first opinion
Hijab - The jilbab is "an overgarment".
Hijab: A Code of Conduct Not Just a Headcover - The jilbab is "a full length coat or cloak".
Hijab: How It Protects And Benefits - The jilbab is "a large loose overcoat".
In Support of Hijaab - The jilbab is "a garment that covers the entire body and should hang down loosely".
The Islamic Hijab (Cover for Muslim Women) - The jilbab is "a dress that covers the whole body of a woman from top to bottom...worn over her normal clothing".
The Islamic Rulings Regarding Women's Dress - The jilbab is "an outergarment to cover her clothing".
Khimar and Jilbab - An Islamic Obligation - The jilbab is "an outergarment".
Looking at Women - The jilbab is "a wide and loose-fitting garment over her normal clothing that drapes down towards the floor".
Must a Muslim Woman Hide Her Face? - The jilbab is "a large cloak".
The Quraanic Concept of Hijaab - The jilbab is "a large cloak".
Road to Hijab - The purpose of the jilbab is "...to cover the clothes a woman wears in her house".
Social System in Islam - The jilbab is "a barrel-like garment over her clothes".
The Veil in Islam - The jilbab is "the cloak that conceals all of the body including the head".
Women in Islam - The jilbab is "an outergarment, a cloth that covers a person from head to foot".
Some webpages that support the second opinion
Different Rulings in Favor of Niqab - The jilbab is "a sheet...covers her body except one eye".
Evidences on an-Niqab - The jilbab is "a cloak that covers her entire body so that nothing appears of her but one eye".
Niqab - The jilbab is "a loose outer cloak which totally conceals her entire body including her face".
Niqab: According to Quran and Sunnah - The jilbab is "a loose outergarment that covers all of a woman's body...over her head and her face".
Niqab an Act of Obedience - The jilbab is "a cloth which covers the entire body from head to toe including the face".
Niqaab - Innovation or True Islamic Tradition? - The jilbab is "a cloak...to screen completely except the eyes".
Niqaab in Light of Quran and Sahih Hadith - The jilbab is "a cloak covering the entire body including the face and hands".
Hijaab - Women's Dress Code and Conduct - The jilbab is "the outer sheet or cloak worn in such a way as to cover her entire person from head to toe including the face".
The Second Category of Hijaab - The jilbab is "a cover from head to foot including the face".
Section B: Why do the scholars say that the jilbab is an outergarment?
There is one thing that all the scholars referenced above are agreed on and that is that the garment called "jilbab" is an outergarment. Their only disagreement is in how much of the body the jilbab is to cover. How did the scholars derive that the jilbab is an outergarment? There are two ways to do this. First, they might just look up the definition of the word "jilbab" in a dictionary of classical Arabic. Second, they might verify for themselves by intelligent analysis of the Quran that the jilbab is an outergarment. We can look at both of these sources.
What is the defintion of the word "jilbab" in Arabic?
The definitive dictionary of classical Arabic, Lisan al-Arab by ibn al-Mandhur, provides the following definition, "The jilbab is the outergarment, mantle, or cloak. It is derived from the word tajalbaba, which means to clothe. Jilbab is the outer sheet or covering which a woman wraps around her ON TOP OF HER GARMENTS to cover herself from head to toe. It hides her body completely" (Lisan al-Arab, volume 7, page 273)
The dictionary Al-Qamus al-Muhit by Abu Tahir al-Fayruzabadi provides the definition, "The jilbab...is that which CONCEALS THE CLOTHES like a cover"
The dictionary Al-Sihah by Jawhari provides the definition, "The jilbab is the cover and some say it is a sheet. Jilbab has been mentioned in the hadiths with the meaning of sheet, which the woman WRAPPED OVER HER CLOTHES"
Intelligent Analysis of the Quran 1: An argument why the jilbab is not just modest clothing but must be an OUTERGARMENT
Quran Surah an-Nur ayah 31 (24:31) reads as follows:
Wa qul li al-mu'minat yaghdudna min absarihinna wa yahfazna furujahunna wa laa yubdina zenatahunna illa maa zahara min haa wal-yadribna bi khumurihinna ala juyubihinna; wa laa yubdina zenatahunna illa li bu'ulatihinna aw aba'ihinna aw aba'i bu'ulatihinna aw abna'ihinna aw abna'i bu'ulatihinna aw ikhwanihinna aw bani ikhwanihinna aw bani akhawatihinna aw nisa'ihinna aw maa malakat aymanu hunna aw at-tabi'ina ghayri ulu'l-irbat min ar-rijal aw at-tifl alladhina lam yazharu ala awrat an-nisa wa laa yadribna bi arjulihinna li yu'lama maa yukhfina min zenatahinna. Wa tubu ilaAllahi jami'an, ayyuha al-mu'minun la'allakum tuflihun
And say to the faithful women to lower their gazes, and to guard their private parts, and not to display their adornment except what is apparent of it, and to extend their headcoverings (khimars) to cover their bosoms, and not to display their adornment except to their husbands, or their fathers, or their husband's fathers, or their sons, or their husband's sons, or their brothers, or their brothers' sons, or their sisters' sons, or their womenfolk, or what their right hands rule (slaves), or the followers from the men who do not feel sexual desire, or the small children to whom the nakedness of women is not apparent, and not to strike their feet (on the ground) so as to make known what they hide of their adornments. And turn in repentance to Allah together, O you the faithful, in order that you are successful.
This ayah lists a number of things that Muslim sisters are to do:
1) Lower the gaze (from looking at what is haram to be seen of men).
2) Guard the private parts. This means not to let them be seen or touched by who is haram to see or touch.
3) Conceal all of the body and its decorations except "what is apparent of it".
Most scholars are agreed that the face and the hands are "what is apparent of it". Some scholars say that only the eyes are "what is apparent of it".
See also point 5 below.
4) Wear a khimar (headcovering) and extend it to cover the bosom. This means that it covers the hair, the neck, the shoulders, and the upper chest.
5) That the husband, mahram relatives, women, slaves, male servants who do not feel sexual desire, and children are the only people who can see more of the woman than "what is apparent of it".
6) Not stamp the feet or otherwise act so that what is hidden becomes known to others.
It can clearly be seen from this analysis that Allah SWT in Suran an-Nur ayah 31 already commands a woman that when non-mahram men are present, she is to wear clothing that is loose and opaque plus a headscarf (referred to in the Quran as khimar) so that with these garments, she covers everything but her face and her hands. If this were all that was necessary, why has Allah SWT also revealed Surah al-Ahzab ayah 59? For this reason, the garment called "jilbab" that has been commanded in Surah al-Ahzab ayah 59 must be something in addition to the modest clothing. The only obvious interpretation is that the garment called "jilbab" is some type of outergarment, something that is worn on top of the modest clothing commanded in Surah an-Nur ayah 31.
Intelligent Analysis of the Quran 2: Another argument why the jilbab is not just modest clothing but must be an OUTERGARMENT
Surah an-Nur ayah 60 (24:60) provides an exemption for certain women in regard to hijab. It reads as follows:
Wa al-qawa'idu min an-nisa allati laa yarjuuna nikahan fa laysa alayhinna junahun an yada'na thiyab hunna ghayra mutabarrijat bi zenat. Wa an yasta'fifna khayru la hunna. WaAllahu Sami'un Alim
And the elderly women, those who do not have hope of marriage, there is no fault on them that they lay aside (some of) their clothing as long as they are not making a display of their adornment. And that they refrain is better for them. And Allah is the Hearer, the Knower
Here is an interesting puzzle. Elderly women who have no hope of getting married again are allowed to "lay aside (some of) their clothing" - but they are restricted from making a display of their adornment. How can a woman lay aside any part of her clothing without making a display of her body?
The only possible answer is that she is laying aside an extra layer. When she takes off the extra layer, the layer of clothing that she is wearing under it will still cover all of her beauty that must be covered. This is the only way to understand this ayah.
So what is this "extra layer" that Muslim women are wearing? My dear sister, it is the jilbab! What else can it be? What we have here is that the Muslim woman is commanded by Surah an-Nur ayah 31 that when she is around non-mahram men, she must cover all of her body except her face and her hands. This rule is always in force whenever non-mahram men are present, whether she is indoors or outdoors. But when she goes outdoors, she is to wear an extra layer, an outergarment, over the clothes she is already wearing (on account of Surah an-Nur ayah 31). This extra layer or outergarment is the jilbab. The only exception to the rule regarding dress is that elderly women who do not have hope of marriage may leave off the jilbab as long as they continue to wear other clothing that covers all of their bodies except the face and hands.
Surah an-Nur ayah 60 would not even make sense unless the jilbab is an extra layer, an outergarment worn over the normal clothes. This is another reason why modest clothing is not enough.
Note 1: This opinion has been reported from Ibn Abbas, Ibn Umar, Mujahid, Sa'id ibn Jubayr, Abu Ash-Sha'tha, Ibrahim An-Nakha'i, Al-Hasan, Qatadah, Az-Zuhri, and Al-Awza'i in Imam ibn Kathir's tafsir (commentary) on Surah an-Nur ayah 60. Convinced yet?
Note 2: Shaykh Yusuf Qaradawi discusses the permission for elderly women to lay aside their jilbabs at The Lawful and the Prohibited in Islam. Shaykh Qaradawi, as noted above, holds that the jilbab is a coat or cloak. The same issue is discussed from the viewpoint that the jilbab covers everything but the eyes at The Third Category of Hijaab (note: this group seem to be holding to the traditional interpretation that it is the jilbab that the elderly women may lay aside, even though in their viewpoint this allows the display of some of the beauty - the face and hands - that is otherwise concealed).
Section C: So, the jilbab is an OUTERGARMENT, but why?
Modesty is always a concern whenever non-mahram men are present, and for the purposes of modesty a sister must wear a khimar and loose, opaque clothing so that she covers everything but her face and hands whenever non-mahram men are present. This is what has been commanded by Surah an-Nur ayah 31. It is therefore correct to say that shalwar kameez or other conservative outfits, and the khimar, are sufficient for the purposes of modesty.
But when a sister goes outdoors or in public, there may be other concerns beyond modesty. Surah al-Ahzab ayah 59 mentions these concerns in giving the reason for the command of jilbab, when it says "that is better so that they are recognized and not annoyed". From this we can see that the jilbab has two purposes:
1) To make the sister recognizable as a Muslim woman
2) To protect her from being "annoyed", i.e., harassed
A discussion of the duty of the Muslim sister to assert her Islamic identity can be found at Fear and the Muslim Woman, which discusses why Muslim women in the West should not let fear prevent them from wearing hijab, but they should assert their Islamic identity.
A discussion of the importance of protection for the Muslim sister when she is in unsecured locations outdoors or in public where all manner of people may be around can be found at The Quraanic Concept of Hijaab, which discusses why Allah SWT has set different rules of dress for different situations, and why the situation outdoors and in public demands protection for the Muslim sister.
In conclusion, the jilbab is not primarily for the purpose of modesty, which is satisfied by the khimar and conservative clothes, but is for the additional purposes of identity and protection, issues that are only factors of concern outdoors and in open public places. This is why Allah SWT has commanded the jilbab for these locations.