Tempest in a teapot, as far as I can see.

What I heard on the news was that the theme for the costume party was "bad taste" as well as "colonial and native," and Harry certainly succeeded in portraying bad taste.

FYI to my fellow Amuricans: In Britspeak, a "fancy-dress party" is what we'd call a "costume party."

The Shambles asks:

"...dressing-up as anything threatens to offend someone. Or should this form of dressing always be seen as harmless fun? "

I say "yes," it's nothing BUT harmless fun. Of course, I live in a city where masking/costuming is a way of life; we're used to it and manage to maintain a clam perspective about it. Anyone who can't take a joke? F*** 'im!