we went last December, early (like around the 8th or so)
There were a lot of families with matching red or green t-shirts....some little girls in candy-cane fabric dresses...lots of Christmas lights lite-up necklaces, lots of Christmas head bands with reindeer antlers or Mickey Christmas ears.
Actual Christmas costumes or really dressy outfits...no. You could tell people who were dressing for photos...but it was Christmas-themed park casual clothes.
As for preferences on parties...we actually really enjoyed them both. They are 2 completely different experiences. Both parades are fabulous...as are the fireworks. I think the Halloween party had more going on...but we loved the Christmas atmosphere and the castmembers in Christmas outfits, the music, etc. It was fun.