Is there a difference between "clothe with" and "clothe in"?

In the literal sense there is no difference brought about by the particular preposition used. In the several figurative senses, similarly, the two prepositions are used with no difference in almost all cases. In one case "in" is not used.

(Some senses have been omitted, in particular obsolete)

(SOED) Also (obsolete) cloath. Pa.t. and ppl. clothed (arch., techn., and formal) clad.
I lit. 1 v.t. Provide with clothes; put clothes upon; dress. (Followed by in, with)
II fig. 5 v.t. Cover as with clothes or a cloth (Followed by in, with)
            6 v.t. Conceal the true nature or form of; disguise (Followed by in, with)
            7 v.t. Invest or endue with a character, attributes etc.; endow with power, a liability, etc.
            8 v.t. Express (thoughts, ideas, etc.) in, with.

5 CARLYLE Thus he [Man] is also said to be clothed with a body.
     H. BELLOC A wood … clothing a rocky peak.
7 BUNYAN With such gravity cloath every page
    JEFFERSON The clauses clothing … consuls with privileges of the laws of nations.

There is no significant preference of preposition but a clear tendency for using the participles and the past rather than the infinitive or the present (ngram 1, ngram 2).

She clothed her children in the finest garments.
     This is an instance of the literary usage (1), as is the second sentence.

The last sentence is an instance of "7", but according to the usage of preposition made precise in "7", "in" should not be used.