We did a luau for our spring carnival last year. Try
Rhode Island Novelty
for decorations and hula skirts. They were alot cheaper than Oriental (although the latest Oriental catalog has a few luau closeouts)
Also, check ebay as they have alot of decorations that you would find in these catalogs at huge discounts.
As far as games, we had a limbo line, "beach" volleyball in the playground area (we have crushed rubber footing), face painting, carnival type games and a dunk tank. We are very lucky that one of our volunteer moms is a professional party planner so she has access to a variety of sources and many of the decorations we used were hers. Also, we borrowed large potted tropical plants/trees from a local landscaping business to dress things up as we are in the northeast and pine trees don't look very tropical.
Anything where the students get to do something to the principal is always a hit. Dunk tank, pie throwing etc.
Hope this helps!