We were staying offsite but had dinner at Ohana on July 4 (we decided to stay out of the parks that day). After dinner we strolled to the beach and sat to watch both the fireworks and the Electric Water Pageant. It was crowded but not uncomfortably so. I would suggest bringing something to sit on to enjoy the show. We had parked in the Poly lot, and were given a three hour pass, but were well under that for time. No one will kick you out for not being a hotel guest. I wouldn't try to take a dip in the Volcano pool though...
Have a great time dining at Kona and watching the fireworks, it is a special time to be there. I think the Electric Water Pageant is even patriotic themed this week.
Enjoy!