It’s both. Children are needlessly assaulted with superficial horror devoid of meaning, and sheltered from real death, which is full of meaning. The problem is not dealing with death creatively — of course we should do this. It is cheapening death and evil with caricatures and mockery. That is what Halloween does.
I have yet to see someone make an argument that draws the line directly from the actual traditional Halloween celebration to a better, more healthy understanding of death and evil for children. As far as I can see, that is coming from rebuttals to Halloween (see Jayme Metzgar’s comment) not the participation in it.
While I concede that millions of people find it fun and that it can bring communities together, the idea that Halloween helps us deal with death strikes me as baseless idealism. It is the quintessential social scientist error of finding a profound justification for something when in fact there is none.