I'm not a parent, so forgive my ignorance:

1) The article seems to imply that plain diapers are more expensive now. That doesn't make sense to me- do you pay a premium for butt Elmo?

2) What kind of dyes do they use for this? Could they be harmful?

The plain diapers mentioned are the 7th Generation ones, and you pay a premium for the eco-friendly 7th Generation products. Most of the cheapest mass produced ones are the big brands - Luvs, Huggies, Pampers - which all have printing, usually characters. Target's own brand does not have characters. The printing is just geometric shapes. But they also fit my daughter poorly, and the tabs were hard to use, so the lower price was not worth it.

I guess the dye in anything could be harmful. But the printing is on the outside of the diaper, so it is not against the baby's skin. Concern about health risk from the printed characters would be akin to concern about health risk from the design printed on a T-shirt. Possibly less so, in fact, since kids tend to chew on T-shirts, but can get to the diapers to chew on.