I'm part native American on my mother's side and tbh I don't think there's anything wrong with Julia and Michelle's designs since they always had that native American element to their design which I liked, I think the feather jewelry, headbands, braids or twin braids, and the more western take on their designs with the jeans and animal print in some occasions was OK. They always seemed to have a good balance between casual and street with the jeans and cowboy boots paired with the native accessories.
The customization with the war paint and headdresses imo was beautiful and I think it was very good for them and I don't see it leading to stereotypes at all, with characters like Miguel who was blatantly dressed as a bull fighter in Tekken 6, and with how Tekken has always included cultural or fitting items for characters(Ethnic hair and clothes for christie/Eddy, second hand and used clothes for Law, etc.), I don't think it did anything negative to their design at all, but the devs could definitely expand on that and offer more types of customization since native Americans are more than just that, especially with Julia being a researcher and streamer now.
Only thing I hope is that if they are going to refine Julia, make her new influencer persona more authentic and mesh well since in Tekken 7 it seemed kinda odd since before, Julia has always been more quiet and reserved and focused on her research and reforestation. Now in T7, she's almost a completely different character with how outgoing she is and the streaming antics just seem kinda cringe and out of character.