I'll admit it. I dressed up last night (as a kung-fu master), along with the roommate, the other roomate, and the Iowan. We drank some beer, ate some chocolate (only one group of trick-or-treaters had rung our doorbell by 8:00, so we gave up and began eating the candy ourselves), and hopped on the bizarre social experiment that is the subway on Halloween.
I am not sure whether dressing up and wandering around the streets of New York constitutes "observing" the holiday. After all, on Purim, if you dress up, you have by no means fulfilled the obligations of that holiday. Then, because I neither handed out candy (the roommate beat me to the door), nor requested it from strangers, have I observed the holiday? Due to severe crowding, I couldn't even really see the parade. I think that there is some room for doubt.
At any rate, Jew York City would argue that "good Jews" (Harley's favorite term) don't observe Halloween. And they probably wouldn't appreciate my hair-splitting. Neither would Minor Fast Days, who puts candy out in a bowl outside his door, instead of actually interacting with the trick-or-treaters. Although, to be fair, I really like his point that "we do not have to celebrate the holiday, but we can be respectful to others that do."
If you want the real rationale behind the Jewish observance (or not) of Halloween, MyJewishLearning.com has a fairly intelligent discussion of the halakhic issues involved. If you aren't interested in the halakha, or do not consider it binding, Pamela Geller Oshry of Atlas Shrugs gives a historical reason not to observe: Halloween was often a time during which pogroms* occured. I'm not sure where she gets that information, but, if true, it would definitely be a reason to abstain. My issue with her arguement is as follows: Pamela says that "You can not, must not divorce history from reality, from today." In that I agree, but then she goes on to say that she is looking forward to Thanksgiving. Clearly she hasn't seen the ad where the kids are at a Thanksgiving pageant, and they list the crimes of the Pilgrims against the Native Americans.
All in all? Halloween is fun for now, but I don't know if I'd let my kids dress up and go trick-or-treating. Especially if they wanted to dress in scandalous costumes. And the last reason not to celebrate: Halloween can cause some awkward situations.
*Pogroms were state-sponsored, or sanctioned riots by Russians against the Jews who lived in the Pale of settlement, in the late 19th and early 20th centuries.