This needs to be fixed! You can’t have a festival without Inky Black.
[Edit] I found a way to fix it. Leave the festival grounds. Down your inky black, then stroll into the festival grounds on foot. If you fly into the festival grounds your Inky Black potion will not work.
The festival looks way better on Inky Black.
I keep roughly 1000 inky black pots in my bags at all times. the game looks completely different at night.
I was heartbroken to discover that Inky Black doesn’t work in Hallowfall. 
The power of the Light was just too much for it, I suppose.
The same works for skybox toys. If you walk into the festival your skybox toys will work. If you fly into the festivals they won’t.
[EDIT]
Okay for some reason my Inky Black trick isn’t working today. I can’t get the inky black potion to work whether I enter the festival area on foot or mounted.
[EDIT2]
Drinking an Inky Black inside the festival, entering a dungeon and then exiting the Inky Black potion will be in effect. Also I notice that the normal sky box gets completely messed up when clouds roll over the festival so I think this is some sort of skybox bug.
[EDIT3]
Okay, the in and out of the dungeon trick doesn’t always work. It would seen that there’s just some sort of bug with the skybox over the Caverns of Time area that makes skybox potions and toys completely unreliable. I sure hope Blizzard fixes this because the festival looks amazing with an Inky Black potion but kinda ho-hum without it.