。
She looked happy wearing her new dress.
Literal
She [topic-は] new dress [object-を] wearing happy-looking was.
うれしそう uses the ~そう auxiliary (attached to the adjective stem うれし-) to express appearance: 'looks happy.' This appearance-based そう is distinct from hearsay そうだ — it reports what the speaker can see from the outside. The past copula だった frames this as a past observation.