T.H.
I think the taking off all clothing while sitting is normal, all three of my kids stripped from the waist down, when they first started potty training.
It takes time for them to stop peeing in their underwear, alot of training underwear is thicker and feels kind of like a diaper to kids. If he's doing good using the potty, then eventually it will all click and come together.
I'd suggest waiting until he wakes up dry in the morning before switching out of night time diapers. My daughter was doing great during the days and no accidents, so I stopped night time diapers thinking she was ready. I did alot of sheet changing and mattress cleaning. With my boys I waited. When they're sleeping they don't feel the "have to go" feeling, so they just go.
Hope this helps and good luck with your potty training!