a quick google for carnival decorations suggests to me that a carnival is an american version of our fetes.
based on that I'd use loads of balloons and streamers and host a couple of games (along the lines of fete type) or borrow a popcorn maker, candyfloss etc.
or you could set up a barbecue and serve chicken legs, thighs marinated in that dragons den reggae reggae sauce and play bob marley in the background
having been to carnival in trindad and tobabgo it really was a rather large party where anything goes and lots of music and dance. we stood around watching, learning the local dance and drinking some frozen crushed ice covered in condensed milk and pink food colouring.