Form inputs in Splunk dashboards can dynamically impact the panels using inline searches by allowing a token in the search to be replaced by a form input value (Option D). This capability enables dashboard panels to update their content based on user interaction with the form elements. When a user makes a selection or enters data into a form input, the corresponding token in the search string of a dashboard panel is replaced with this value, effectively customizing the search based on user input. This feature makes dashboards more interactive and adaptable to different user needs or questions.