It says in the Kitzur Shulchan Aruch (104:2), "One who disgraces Chol Hamo'ed, even though he has to his credit Torah and good deeds, has no share in the World to Come." Disgracing Chol Hamoed implies not honoring it with... wearing better clothes. Therefore, every man is obligated to honor it... and to wear dignified clothing."
1) Why does one lose his share in the World to Come just because he disgraced Chol Hamo'ed?
2) What does wearing better clothes mean?
To Q1: The source is the mishna in Ovos 3 (11)
רבי אלעזר המודעי אומר, המחלל את הקדשים, והמבזה את המועדות, והמלבין פני חברו ברבים , והמפר בריתו של אברהם אבינו עליו השלום, והמגלה פנים בתורה שלא כהלכה, אף על פי שיש בידו תורה ומעשים טובים, אין לו חלק לעולם הבא. (משנה, מסכת אבות ג יא)
Darche Noam writes
Viewing Chol Hamoed as a sanctified day of Chol (as opposed to a mini Yom Tov) might enable us to understand a Rashi on Pirkei Avot (3:11). Among Rav Elazar Hamodai’s list of things that cause one to lose his portion in the World to Come is “Hamevazeh et hamoadot” – one who disgraces the holidays. Rashi explains that this refers to one who “desecrates Chol Hamoed through doing work or treating it as a normal weekday with respect to eating and drinking. Because it is not as stringent as Yom Tov he does not take care to keep it.”
It suggests the reason for the stringency is
Perhaps Rashi limits the Mishna to Chol Hamoed because he takes the position, that while Shabbat and Yom Tov are holy (and might be included in the first item in the list, המחלל את הקדשים), Chol Hamoed is raised up “Chol”. Chol Hamoed exemplifies a core Jewish approach – sanctifying the chol, creating the bridge between the holy and the mundane. That might be why, according to Rashi, the strong words in the Mishna refer to Chol Hamoed.
So it seems that the mishna's statement is to emphasize the importance of chol hamoed and so to speak to guard against the use of the word “just” in your question “just because he disgraced Chol Hamo'ed?”
Chol Hamoed expresses a fundamental Jewish concept that must not be abrogated.
To Q2: Halachipedia writes:
There’s a requirement of Kavod and Oneg on Chol HaMoed. This includes having special food, drinks, and clothing, but it is more lenient than Kavod of Yom Tov.
As part of Kavod, one should wear clothes that a little better than weekday clothes. Some have the minhag to wear Shabbat clothing on Chol HaMoed.
It refers here to
Mishna Brurah 530:1, Yalkut Yosef (Moadim pg 502), and Aruch HaShulchan 530:4 write that there’s an obligation to wear clothing which is a little nicer than regular weekday clothing. Nimukei Orach Chaim 530:3 and Chaye Adam 106:1 hold that one should wearShabbat clothes, but one doesn’t need to wear Yom Tov clothing which are supposed to be a little better than Shabbat clothing. Mishna Brurah 530:1 writes that the Maharil's practice was to wear Shabbat clothes on Chol HaMoed.
