Yes - it's a Local Fete.

Likewise in Australia, e.g. the school fete.

Same here. I think there's a difference between a party and a feast/fest/fête/fiesta/festival, since a "party" (in my mind) is one held by an individual to which people are invited, and the others are more like community events that anyone can attend.

It is accepted. la fête can be: party, feast, holiday, festival, fete, or fair. http://www.larousse.com/en/dictionaries/french-english/f%C3%AAte/33362

Or feast, for that matter, as j'en sent a religious connotation. Or j'y sent rather... Not sure: il est trop dificile

"Festival" should really be translated as "festival." "Fête" more closely means "party."

Yes, that makes good sense. 'Fête' translates as 'holiday,' so why not? It ought to be accepted.

It's a local party, for local people. (League of gentlemen).

First, I'm no authority, but I venture to guess that 'c'est' must be translated 'he/she/it is, this/that is.' I'm sure that 'there is' would have to be 'il y a.' Maybe someone who knows what they're talking about would like to comment here.

You're right, it's not a word, it's a suffix, e.g. filmfest, lovefest, etc. 'Fête' is certainly an English word, borrowed from French, of course, but as well-established in English as is 'weekend' in French.