Literal use of 'window dressing'
One early instance of "window-dressing" in its shop window sense appears in a classified advertisement in the [Melbourne, Victoria] Argus (May 29, 1856):
To Drapers' Assistants.—Wanted a first-rate Hand, used to window-dressing. H. Tewsley, Brunswick-street.
The term also appears, in unhyphenated form, less than a year later in another classified advertisement in the [Melbourne, Victoria] Argus (March 24, 1857):
Drapers assistant wanted for Bendigs, must know the Fancy Trade well, and have been accustomed to Window Dressing. Good references required. Ecroyd and Butters, 82 Collins-street east.
The advertisers' assumption that people looking for work (or workers) in a draper's shop would understand the meaning f "window dressing" suggests that the term had already been in reasonably widespread use for some time when these ads appeared. Indeed, the term "window dresser" appears a bit years earlier in yet another want ad in the same newspaper. From a classified advertisement in the [Melbourne, Victoria] Argus (April 5, 1853):
Wanted, an engagement in a Draper's Shop or Store, by a young married man, thoroughly coonversant with the drapery trade in all its branches, who can give references as to integrity, capacity, and address, to highly respectable parties in this city. He is a good window dresser, and not afraid of work ; apply to J. W., III, Elizabeth-street.
These three examples all come from Melbourne, Victoria. But a classified advertisement of similar age appears in the [London, England] Morning Advertiser (January 12, 1853):
Wanted active young man, of good character and thorough business habits, to take the lead in selling, window dressing, Ac. Apply 101, St. John-gtreet-road, near the Angel, Islington.
And a classified advertisement for a "window dresser" appears in the Stamford [Lincolnshire] Mercury (September 7, 1855):
Window Dresser; Saleswoman in the Shop and Apply to Kpn. bhaw. draper, HnlL W.
There is also an interesting instance of "window-dressing" from a 1774 British law "An act for the further and better regulation of buildings, and party-walls; and for the more effectually preventing mischiefs by fire within the cities of London and Westminster, and the liberties thereof, and other the parishes, precincts, and places, within the weekly bills of mortality, the parishes of Saint Mary-le-bon, Paddington, Saint Pancras, and Saint Luke at Chelsea, in the county of Middlesex ; and for indemnifying, under certain conditions, builders and other persons against the penalties to which they are or may be liable for erecting buildings within the limits aforesaid contrary to law":
And be it further enacted by the authority aforesaid, That every coping, cornice, facia, window-dressing, portico, balcony, balustrade, or other external decoration or projection whatsoever, to be made after the said twenty-fourth day of June, to any building of the first, second, third, or fourth rate or class of building ; ... shall externally b of brick, stone, burnt clay, or artificial stone, stucco, lead, or iron ; except the cornices and dressings to shop windows ; ...
Here, however, "window-dressing" appears to refer to the external or structural forms associated with a building's windows. If so, this is not directly related to "window dressing" in the sense of "design or layout of merchandise to be visible in a store window to passers-by."
Figurative use of 'window dressing'
An early instance of "window dressing" used figuratively, at least 14 years before the 1898 date specified in the Etymology Online entry, appears in "Turnovers" from The Globe: Essays and Sketches, Social, Descriptive and Humorous, by the Best Writers of the Day. This volume, reprinted form articles previously published in the [London] Globe, is undated, but it bears a date stamp from the Bodleian Library at Oxford of April 28, 1884. In any event, the essay in question, titled "Dressing the Window," looks at the consumer appeal of dressed windows and then considers how the mind is susceptible to other forms of "window dressing":
The traveller, noting these things [the effects of commercial window dressing], may possibly have smiled, and have thought how simple a device, and how easily seen through, dressing the window is. A little reflection, however, lads him to consider how extensively applied is the art, in all the concerns of life, and ho much good nervous tissue is burnt on its altar. It will consequently attain an importance in his eyes sufficient to command his profound respect, ... Say that he is in his educational theories a mute inglorious Herbert Spencer, he will put down three-fourth of the school studies of the present generations only so much dressing the window, with this difference, that at the draper's there are plenty of goods inside, while with the modern "educated" youth and maiden most of the goods are in the shop window. He will consider how many learned principals and cultured preceptresses are engaged all their lives long in dressing the windows of their pupils' minds with this sweet thing in dead languages, or "recherché specialité" (to use draper's French) in verse writing, or that elegant novelty in piano-strumming, or positively the latest fashion in flower-painting upon teakettles. Even this one consideration will cause him to smile a little less, and to hope that the subjects of this window-dressing may never feel occasion to smile on the other side of their mouths altogether.
Clearly the point here is to treat "window dressing" as a metaphor for enticement into acceptance of or belief in something that may have far less substantial worth than it is presented as having.
Aside from a seemingly unrelated sense of "window-dressing" dating to 1774, the earliest matches that I could find for "window dressing" and "window dresser" in their literal sense were from classified advertisements published in 1853, in London (England) and Melbourne (Victoria), respectively. The earliest figurative use of "window dressing" that I could find is in a London newspaper essay first published in 1884 or slightly earlier.