It depends on where you are staying.
I believe the DVC resorts do not allow any decorations.
If you stay at a Value or Mod - you can certainly decorate - with restrictions. You cannot use anything that may leave a mark (like tape of any kind, or nails, tacks etc..)
You can use magnets on the doors and suction cups to hang things or window clings.
If you stay at a Deluxe you can certainly decorate your room (using the above guidelines). But there may be certain restricitions about your windows/balcony. For example at AKL I am quite certain they would not allow anything.
Here is a great thread dedicated to *Decorating your Window*.
http://www.disboards.com/showthread.php?t=1867638