Shadowdancer said:
Boothbey already did in his post.
Turns out I'm illiterate. Ya learn something new every day.
And as he pointed out, games of luck, or rather skill at luck where ones fate or friends hang in the balance are a LOT of fun. It's one of the reasons I like Castle Amber so much. (It even has a tarot card game which seems to be the first precurser to the deck of many things.) And there have got to be at least a couple of twilight zone episodes, or tales from the crypt for that matter, to blatantly steal from.
Might be a little much at first level, and, again I didn't read the book see above, but why not have a real live hall/house of horrors with some nice flesh eating zombies munching on the people who preceeded the PC's.
Maybe have the PC's notice that some of the people who died at the carnival were damned to 'enjoy' or 'work' the carnival in everlasting undeath. Perhaps if one of PC dies, they initially join the carnival, (or a loved one from a PC's backstory turns up in the carnival, or an NPC they've grown fond is so cursed) and the surviving party members have the opportunity to gamble for their friends and loved ones souls. (Game mechanic wise you might not nessecarily need "raise dead" etc, unless you want it such that the 3rd level illusionist made the carnival, as opposed to was trapped into running it. After all as an evil magical carnival it only really needs to follow its own rules, which should be ruthelessly consistant.)
The freaks might be particularly unsettling....
You could have them go into a tunnel. Then have them pop out on the other side in a land they do not know, where a little gnome gives them an energy bow, a shield, a club, an elven cloak, a magic hat, and an extending staff. Then have the gnome tell them that they'll need to find their own way home and to watch out for Venger.