Participles are used to modify nouns in a sentence - they are often used as adjectives. So, here, the whole participial phrase is dressed in a cheap suit, but since you only need the participle, and not the whole phrase, the answer is dressed. The word this participle modifies is John. Who was dressed? John.
Locate the participle (not the entire participial phrase) and the word it modifies. Dressed in a cheap suit, John looked like my uncle Earl.