I'm sure you've seen all the lovely IASW Holiday photos in the Christmas thread, correct? So you know how wonderful it is. And remember - you can always post holiday-related questions in that thread!
No, it's not better to ride at night. I've always advised people to ride it in the daytime - in fact, head back to Fantasyland as soon as you get in the park and ride it before the line gets hideous. At night, just go by and look at it and take photos of the wonderful colors or projections.
Be forewarned that last year, when my group and I strolled back to IASWH at night so that one of my friends could see what it looked like (she had never seen it before), the wall of people in front of the ride was so massive and impenetrable that it would have been tough to get through to take photos. I couldn't even really tell if there was a PhotoPass person set up there like there had been in 2008. There were just too many people congregated back there. We didn't even try to get through to take photos, let alone attempt to ride it. We turned and walked away.
Of course, you may have a different experience. Perhaps the night you go would not be as crowded as the night I went in 2009 and, thus, the wall of people may not be so bad. When exactly are you going?