I pick my battles. Some things are worth fighting for. A Halloween decoration does not even make the list.
I would not even begin to call this a free speech issue. If I found out I had done something, even inadvertently, that hurt someone this much, I would be apologizing. Not because I was wrong, but because I was truly sorry for their pain.
This whole argument sounds like my kids fighting. My son steps on his sister's toe and she cries. I tell him to be more careful, and he says, "It was an accident! I didn't mean to step on her toe! She cries about everything! You always take her side!"
To which I say, "You aren't in trouble. But the polite thing to do when you step on someone's toe is to apologize and ask if they are alright. Even if you didn't mean to do it. Even if she was standing too close to you, (perhaps violating your personal space). And try not to do it again."
It's about that mature, too. Ugh.