We did a disco dance theme this year and one decoration we did was cute, we took old vinyl 45 records (I bought a lot on eBay for CHEAP) and spraypainted them with silver and gold Krylon "Make it Chrome" spray paint. They turned out GREAT and reflected the lights from the disco ball.
We also made some big signs out of poster board in funky neon colors - "Peace" "Love" and we had the kids all color peace signs and smiley faces. Very cute!!
We did a 50's theme last year complete with a soda jerk (one of the dads dressed in costume and it was really neat). For "snacks" we served soda and let the kids make their own ice cream sundaes with all the fixings. Its not exactly the same time frame, but the kids loved it!!!!!!!!!!!!!!
Disco? Sparkle and glitz. I think of vintage MTV - lots of lights - mirrors on the walls. KC and the Sunshine band, Rick James - Funky Town!
Have fun and keep it simple!!!
(maybe you could collect those AOL CD's that come in the mail and plaster a wall full of them for the reflective effect? - or hot glue the printed sides together and string them from the ceiling some how)