The EMD update targeted the people who see the search volume for a specific keyword and then purchase exactkeyword.com to rank for that keyword.
But if I write a blog post about "red widgets in texas", it is still beneficial to have all, or some, of those keywords in my URL.
mywhateverblog.com/red-widgets-in-texas/ is better than mywhateverblog.com/?p=545
Sure, you can still build a high quality site on an EMD, but the main reason for the update was because it was a spammer's paradise. The majority of people registering them were doing so with the intent of abusing the EMD's power at the time. In many cases, spam will get you to the top of the SERPs. But during EMD's heyday, spam + an EMD almost guaranteed a #1 ranking for the target keyword. People were selling EMD starter packages that would include EMD, 5 articles, and some link spam for good measure. It was fairly easy because of the weight EMDs were getting in the algorithm. I have no data to back this up. Purely my observations from being in the space during that time.
So yeah, I should have clarified a bit. I wasn't trying to imply EMDs were all penalized.
[1] http://googlewebmastercentral.blogspot.co.uk/2008/09/dynamic...
To your point, I could have used static vs. static and dynamic vs. dynamic examples such as:
mywhateverblog.com/page1.html is not as good as mywhateverblog.com/red-widgets-in-texas.html
mywhateverblog.com/?p=595 is not as good as mywhateverblog.com/red-widgets-in-texas?id=595
From Google's own SEO Starter guide [1]:
"Use words in URLs! URLs with words that are relevant to your site's content and structure are friendlier for visitors navigating your site. Visitors remember them better and might be more willing to link to them.
Avoid using lengthy URLs with unnecessary parameters and session IDs; choosing generic page names like "page1.html"; using excessive keywords like"baseball-cards-baseball-cards-baseballcards.htm"
And from Google's Webmaster Tools page regarding URL structure [2]:
"A site's URL structure should be as simple as possible. Consider organizing your content so that URLs are constructed logically and in a manner that is most intelligible to humans (when possible, readable words rather than long ID numbers). For example, if you're searching for information about aviation, a URL like http://en.wikipedia.org/wiki/Aviation will help you decide whether to click that link. A URL like http://www.example.com/index.php?id_sezione=360&sid=3a5e..., is much less appealing to users."
[1] http://static.googleusercontent.com/external_content/untrust...
[2] http://support.google.com/webmasters/bin/answer.py?hl=en&...