No, that wouldn't happen, that only Ouran cosplayers would be allowed in. Too much discrimination for what should be a bigger event.
Formal wear and dressy cosplay would be allowed. Possibly nix the masks, though that would be entertaining for the hosts. xD I can imagine them now... Identical masks for Hikaru and Kaoru, a really elaborate one for Tamaki, something sleek for Kyouya, a cute mask for Hunny, a mask that is not too attention grabbing or maybe a manly mask for Mori, and something simple for Haruhi.
The Ouran-themed part would be having hosts to dance with, some Ouran music as part of the playlist, screencaps of the ball episode to show people some examples of what to wear (but not be limited to that), maybe a hug from the king (or host of choice?) as a prize to the best dancer or something (thinking back to that episode).