I agree about instructional time, but school is also about socialization and community...building good citizens. Celebrations bring parents to the school faster than PTA meetings and teacher conferences do.
Public schools are historically also about enforcing cultural conformity, by ensuring everyone celebrates the same holidays in the same ways.
It was a much bigger deal in the 50's, when children would be taught everything right down to what they should eat and how they should do their hair and dress, in an overt attempt to erase all traces of ethnicity. But even as late as the 1970's, a friend of mine remembers coming home and telling her mother that they had to purchase and cook a turkey for Thanksgiving, because that's what her teacher said "everyone" does. They'd never had a turkey before, but her mother dutifully went out and got one, so they could have a "proper" Thanksgiving.
Now, Halloween's one of the leftovers. And don't get me wrong, it's also one of my favourite holidays. I love that it's wandered so far from it's Christian roots, that there are Christian sects which refuse to celebrate it, and Pagan sects which embrace it as Samhain!
However, I really don't think kids need to wear their costumes to school (certainly they don't in our school district, and haven't for the last 15 years or so). I don't even think schools should be required to hold any kind of after hours party, though it's quite nice that Walpole Elementary is doing this. Reminds me of our local elementary school's "haunted house" that they'd put up in the gym, in the evening.
Yes, it's true that schools are a place of not just learning, but also acculturation. However, I really don't think a lunch time Halloween parade is the be-all and end-all of making good citizens out of our students.
Personally, if we're going to focus on citizenship, I'd rather see a fall clean up detail, can drives, or kids making Thanksgiving meals for poor people, etc. (And happily, most schools do these things, too.)
Halloween can be celebrated at home. No harm, no foul.