I'm really thankful that I haven't encountered this problem, mind you it's been a Halloween dryspell up here. Kids are happy as hell just to see any decor. I was amazed last year when I took a break from candy duty and went for a walk, there was maybe one house every four blocks that had a decoration. When I was a kid if the place wasn't decorated, it meant that house wasn't participating, I guess that's different now.
I'm torn between the ideas of scaring the kids or the legal threats. Through my personal experience of being something of a shít disturber (mostly in school) legal threats always kept me on my toes. I may have looked like I wasn't intimidated, however I've never forgotten how uncomfortable it made me feel. My friends have shared similar experiences. What you have to do is be assertive, and look them in they eyes when you're addressing them. It's a lot like disciplining a dog, really.