I have the outfits but confused about equipping them. I haven't yet because I got thrown off by the "are you sure you want to do this? this will be soulbound" message. I have no idea what that means. I'm guessing either a) you can only use them on one character? or b) once you put one on, that's all you'll see regardless of what items you put on? Does it also mean you can never take them off?

edit: thanks, guys. I had no notifications that anyone responded, so I'm just now seeing these. All responses helped my understanding.

There is a dust which dissipates illusion and removes soulbound status. Tell the same NPC that you tired of illusions.

I know that, but the Loyalist items are special. Are you saying that the special items in the Loyalist pack can be made not soulbound? Because I think that's wrong.

I'm answering to OP's concern about being unable to use wearable items (Like Explorer's set) on different character due to illusion. It is possible to remove illusion and transfer item.
As for loyalist items like Willow wisp, they stay soulbound, but it doesn't matter since you can pick them for each character.