You can, if you like, keep the costumes very simple. (And yes, they are optional.)
Remember that the weather is unpredictable, but liable to be warmer than you're used to if you come from the North. You and the kids need to see where you're going, and get on and off rides safely without flowing costume parts that can get caught in the machinery. Think carefully about footwear as well, since a little Cinderella in adorable plastic "glass slippers" is going to be crying and limping after a hike across the Magic Kingdom.
Given all that, well, anything goes. Have fun!