I was asked to make teddy bear on cupcakes for a girl's birthday party, as the party theme is "build a bear". My idea is to do fondant cut-out of bears, and stick on frosting.

I'm thinking I can make fondant bears a few days ahead so on the day before delivery, I just need to put them on so I'm not rushing all at one time. However, I now think the fondant gets very dry and hard after a few days, so the kids won't be able to eat the fondant bears at the party. I'm little unsure now.

Any suggestions?  Thanks all in advance.

I would use it and advise that they are food grade but not really edible.. the kids can gnaw on them if they want, whatever! 

Aandreamak, thank you for answering!

Yeah, kids will like it, no matter what.  Go with your original plan and they'll love it.