Lighting structure is separate from it's 'costume'. The lightning is then compatible with any/all festivities and we can encourage the community to decorate/make costumes for them.
The lighting system itself could be made 'intelligent'. They could sparkle as people pass by. Or if it were for halloween, they could play a 'spooky noise' as people pass by. They could be networked together, to put on simple, but coordinated light shows. The color and intensity of the light could play a role too. Think the blue gas light in Milwaukee... Blue on colder nights, Orange when it's warmer.
Ok, here is a thought that's getting out of control... Allow people to interact with the lights via the web (their phones). Each light could have a little 'dance' pattern... Or again, if it's halloween you could allow people to control what it says... as their friends walk by, they could scare them, or play something funny. Oh(!) Valentines day could get really cute with this idea.
Not thinking about the "costume" yet, the lighting device itself would likely be powered by something like an Arduino micrcontroller. One in each light structure. There would need to be some inputs/outputs to power lights, a speaker, maybe other things (like a motion sensor). This would be the lightning device and it would cost somewhere around $85 each. That number is made up.
The "costume" would have to be dual purpose... protect the lightning structure and electronics inside from the elements. It would also be the 'look & feel' of the light. This is what people will see. Perhaps it's a candy cane, or a snow flake... pumpkins or hearts. Maybe it's four leaf clovers or banjo's and fiddles. It could be anything and the community could run competitions to win a chance to have your design used. These don't have to be solid objects. The 'candy canes' for instance can have ribbons and other materials. Get crafty. It just needs to hold up in whatever weather that event occurs within. Winter might be challenging.
...Back to the lighting device itself, this may want to be something more than just lights. Perhaps with a little speaker in each, we could also support square-wide sound. Low volume, background music. Maybe even cricket sounds, etc. If folks could control certain features, like sound effects and color, it would be cool to sit in the square and be able to fill the area with the light sound of crickets chirping. When a family is walking through the square during christmas time, the dad could tap 'santa's slay bells' to play the sound throughout the square and REALLY convince the kids that Santa just flew by.
These aren't decorative lights on light posts. They are a piece of the communities personality. People from all over would start to know our square as the first to be considered a 'smart square'. The physical center of our community would literally create more community.
Communities in the future will have things like this. We have the chance to start it.