When I go into the event, Tala talks to me as a Halloween party is going on....everyone is dancing, but no one has a Halloween costume on. Is this just glitched for the villains, or does this happen for heroes too?
I don't know if you're being serious or not, but those people are not there of their own free will. That's why they look confused and run out, we break Klarion's spell on them.
The current version isn't the same as it is now. Originally, after you enter you see them dancing. Then something appears on the floor, sort of like a mist and the music stops. This is what's confusing them. For some reason this part of the cutscene isn't showing anymore. Also, 'The Midnight Masquerade' is not an event. It's the name of the nightclub. So they're open all year around and probably don't require costumes all the time. Think about it...does everyone dress as pirates to go to Long John Silvers?
That's a special once-a-year promotion for people to talk like English Dalesmen (just because one actor playing a made-up pirate happened to be from the Dales, idiots today believe all pirates talked like that, pathetic) As TheLorax said, the dancers are confused because they are not there willingly and when the music stops the control over them is broken and they spot some psychotic Emo Pilgrim Boy crying on the dance floor, and that's why they run screaming
You see what had happened was......... I have a friend in New Zealand. They are somehow a day ahead of us. So Halloween for him would be Monday for us. Yes, clearly that was it. >_> Halloween is everyday where I live.