Luna had a reason, to go to that party. Sure, it was a personal reason, but if she is to be seen as a legitimate ruler again, she needed to fix her rep. It's as much good for the kingdom as it is for her own peace of mind. Thankfully, she went on the one day where her natural intimidation factor can be spun in a positive light, due to the spirit of the holdiay, which let the other ponies feel safe enough to get to know the real her[[hottip*:this makes way more sense to me than "they were all pretending". I don't even understand how people reach that conclusion, especially since the letter to Celestia was about first impressions and getting to know people and such. And considering the very real discomfort of, well, everyone except Pinkie]].
Wasn't the competition in Cloudsdale, not Ponyville?
Aye, but Rainbow Dash is a Ponyville resident, if not exactly native. Again, irrational fear of being associated with Ponyville, thanks to Jet Set and Upper Crust. Mentioning the Best Young Fliers competition would be met with either "what's a 'rooster'?"-level snooty ignorance, or even worse, they would know who the winner of the competition was and where she hailed from.
I have a message from another time...