Use gray or white synthetic craft fur (the long-haired stuff) to make a quick, yet effective dwarf beard. Cut a long teardrop shape, then cut out a small oval for the mouth about an inch from the round end of the teardrop. Cut small holes at the left and right ends next to the mouth hole, and thread string or elastic through to attach the beard to the head. When cutting the fur, be sure to brush the hairs so they stand relatively upward. This way, the scissors will cut the base cloth and leave the hairs long.
Create a dwarf shirt in minutes using only an oversized t-shirt and a large belt (especially one with a big, square buckle). Wear the shirt and place the belt on the outside; this look will closely resemble the clothing worn by the dwarfs in Disney's "Snow White." Use a plain solid-colored shirt; using this costume method, you can give each of your dwarves a different color of shirt.
Since the large t-shirt will be covering the waistband of the pants, any pair of loose-fitting brown or black pants will do. Pajama pants or sweatpants will have the best look, provided they're not shiny and don't have stripes, decals or patterns on them. If possible, dress all of your dwarves in different colors to create some uniformity in their clothes.
Making your own dwarf hats would be a complicated process, but altering other hats is easy enough. Save up some oversized Santa hats during post-Christmas clearance, or grab them from thrift or rummage sales during the rest of the year. Cut off the pom pom at the end of the hat and the fluffy trim at the base of the hat. Transform each hat from its rich Christmas red into a color to match each dwarf's shirt using fabric spray paint. If you can't match those colors, paint them brown or black to match the pants.
Period boots are a somewhat more complicated matter than the rest of the costume pieces, but you can make it easier by using boot covers over tennis shoes rather than real boots. You can also buy inexpensive pieces like this from costume stores during the Halloween season (look in the pirate section) or year-round from mail order costume suppliers. From as little as a few feet away, these look like the real deal.