They do decorate but more of a fall theme than a Halloween theme. You will find some characters in costume, but not many. And they do have an after hours party in California Adventure. Not quite up to scale as WDW (no parade, no fireworks), but it's still fun. Everyone (almost) dresses up, there are trick or treat stations, pictures with the villains, cool lighting effects, free games in the Paradise Pier area, special shows. We really enjoy it.
We love going in October. Crowds are lower and the weather is still quite nice.