Hi Li,
It's a common problem in E-Commerce sites. Remember, Google crawls dynamic URLs so I wouldn't say it will deadly harm your page but yes that URL structure is not considered as SEO friendly and it carries some weigh to effect a bit.
So my recommendation is to go with SEO base friendly URLs and set a canonical tag that will tells the search engines to use the base version of the URL. That way you can still use dynamic URLs like http://www.costumedirect.com.au/search.php?search_query=edward to get your data, but the search engines will consider the basic version as the final.
Hope this helps!
Umar