I had some success with a Festival of the Gods recently - basically a 12 day festival with each day revolving around things to do with a single god in my 12-god pantheon. Piratecat and some of the other members of the Rat Bastard DM's Club helped with the comments and ideas
I've posted my notes and some of the comments made that I incorporated into the final festival. It worked very well.
Day 1 – Athyra, CG (Dreams, Music, Art; also Psionics)
Feast of Masks
The only main thing I have here is everyone is expected to wear a mask, as the Priestesses of Athyra do.
I imagine that this night would be marked by many masked ball, hundreds or thousands of masked men and women dancing to the music of astonishing musicians. Who is fey, who is human? Not always easy to tell behind the glamours and masks. Many romantic assignations are made on this night, and sometimes the fey chose a human that they finally consummate the lovemaking on the 9th night. It's rumored that if you sleep with a fey who chose you on the Feast of Masks, you will die or be drawn into Faerie by the Feast of the Dead.
Day 2 – Raithscar, LE (War)
Feast of Swords
Exhibitions of swordsmanship and weapons at arms...
[Piratecat mentioned that Sagiro ran] a martial tournament with several categories (weapon and shield, one weapon, two-handed weapons, exotic weapons - with sexier names) and only using wooden weapons. He kept things moving by simplifying fights to three rounds of combat per match, and just comparing opposed attack rolls. The competition got harder in each round.
Day 3 – Lyra, N (the Moon, Wisdom, Knowledge)
Feast of the Moon
The main thing on this day is that everyone stays up till dawn.
Everyone stays up till dawn, but what are they doing? I'd guess drinking and partying, but there is a tradition that sages are free this evening, and perhaps even divinely empowered by the Gods to grant true answers and rare knowledge. This is the night that craftsmen accept applications for their new apprentices, hoping that the Gods will help them choose wisely. (They test the applicants for the next few days.)
Day 4 – Tuan, CN (the Hunt, Wild Beasts, to some extent Lycanthropes)
Feast of the Hunt
The Unseelie choose to hunt whoever killed the Glaistig – if the PC's reach the bridge they are safe.
A vast (drunken?) hunt is organized; think of the running of the bulls in Pamplona, only each year the Fey release 12 monsters into the countryside and everyone hunts them down. They're usually impressive to see, but not particularly dangerous.
Day 5 – Xante, NE (Forbidden Knowledge, Gates, Mysteries, Secrets)
Feast of Secrets
I can see some fortune-telling, but don't know what else...
It is always cloudy on day 5.
On the Feats of Secrets, each person whispers a secret into the night air as a sacrifice to Xante. Does the Goddess collect them somewhere? No one knows, but this feast day is filled by people either expunging their secrets or creating new ones by doing things that they don't usually do. Spontaneous oracles appear on this day, and there is a tradition of maps to hidden places (most fake, a few real) appearing for sale.
Day 6 – Iald, CG (the Seas, Rivers, and Oceans of the world)
Feast of the Sea
Seafood!
In addition to seafood, this is the day for sailing and swimming races. Brave men and women battle a captured octupus (or other sea creature), and women only wear jewelry that has at some point been immersed in water. (ideally from sunken ships, but some people cheat.)
Day 7 – Scura, CE (Storms, Rain, Disasters)
Feast of Storms
Scura is all about paying the goddess off to avoid bad things...
It always rains on this day. One fair goer always ends up dead, the sacrifice/object lesson demanded by Scura, and vast sacrifices are made by all. All wine publically available on this day is sour and watery, and the food is always tasteless; this is to symbolize the sacrifices made to her.
Day 8 – Darvas, NG ("The Smith," Weapons, Architecture, Magical Machinery)
Feast of Builders
The big event today is the choosing of apprentices. The craftsmen have all potential apprentices compete in a variety of crafts-skills for the right to be accepted. In addition, master craftsmen compete against one another in order to produce their finest work. A vast sale of unique goods occurs today, and commissions are taken. There is also a show of crafted magical wonders (like magical toys) in which the fey feature prominently. [If a particular fey always wins this for his magical toys and he doesn't enter one year, rumors will fly and the PCs may want to learn why -- especially if they've seen him win in previous years].
Day 9 – Cyrene, N (Fertility, Marriage, Magic, Druids)
Feast of Magic
I'm imagining this day would be one where people would tend to propose marriage - there's nothing like that going on in the group. There is a Druid in the group, however.
This is the day when weddings are performed and troths plighted. The fields are blessed this day [either by blood or the traditional method of people making love in them), and priests are blessed so that they can then go forth and further bless the fields elsewhere. [In game terms, a ritual empowers any druids who take part in it so that their plant growth spells act as empowered (or whatever) for six months. Since the festival is in September, this probably shouldn't kick in for 6 months of game time, then start being effective for the next six months until the beginning of the festival the following year.]
There is also a spell crafting competition today, in which wizards and clerics compete for the most impressive looking spells. It's all about showmanship and wowing the crowd, with efficacy a distant second in the judging. Illusion magic goes over big today.
Day 10 – Corvus, NE (Messengers, Prophecies, Dark Magic)
Feast of Forgiveness
One of the PC's follows Corvus, and will want to know about this one. I'm seeing the main thing on this day is both Asking Forgiveness for a wrong done, as well as Giving Forgiveness. A sub-current might be practical jokes - doing something for which someone would have to forgive you.
It is traditional for a messenger to arrive at dawn from the King (or from whoever - the Gods? This is sort of like the Olympic Torch arriving... people will be appalled if it doesn't happen.) The messenger's arrival starts the day's festivities.
It is also traditional that an oracle makes a public prophecy today. Sometimes it's canned, but there have been times in the past when the prophecy has definitely been real. It is also not uncommon for more spontaneous oracles to emerge today.
Dark Magical sacrifices occur today. People sometimes feel that they have to forgive these, but few seldom manage it. Incidentally, I love the idea of a day where it is holy to seek forgiveness for crimes and wrongdoings. This would be a day where 12 men who were sentenced to be hanged or imprisoned the next day would instead be set free, never having to face judgment.
Day 11 – Galerra, LN (the Dead, Harvest, Judgement)
Feast of Harvest
The Festival is taking place in September, so Harvest is applicable. Perhaps people are expected to help with the crops? I don't know. This should be fairly big day, with much feasting and eating at the end.
Crops will have been finished by the time this festival begins, but perhaps a small part of one field is left until today; people harvest and thresh the last wheat of the year. Today is known for its fresh bread. This is also the day that everyone who has been arrested is judged and executed. At night in a huge drunken party, there is also a hilarious "Festival Judge" who calls people to account for their actions since the beginning of the festival, and gives them silly penances for their actions.
Day 12 – Garwyn, LG - but dead for 1,000 years (Sun, Fire, the Sky)
Feast of the Dead
Big somber ending for the Festival? Or like a traditional New Orleans funeral, with music and dancing? The god himself is dead
I'd go for a cross between your two suggested endings, with lots of music and dancing between serious prayer sessions from the head of the Temples. Since it has been a millenium since Garwyn died, this will be a bigger deal this year, with lots of talk about sacrifice.
This is also a day when people revere and remember their dead loved ones. The skeleton and skull is a huge motif, like Mexico's Day of the Dead (dia de los muetros.)