Costume initially offended us, though funny in truth (6)
I believe the answer is:
outfit
'costume' is the definition.
(I've seen this before)
'initially offended us though funny in truth' is the wordplay.
'initially' indicates taking the first letters.
The first letters of 'offended us though funny in truth' is 'OUTFIT'.
(Other definitions for outfit that I've seen before include "suit" , "Business" , "Set of matching clothes" , "Garb - equipment" , "complete set of equipment" .)