Make Magazine blog had a link to a guy's site. He'd made a jellyfish costume by bolting a skateboarding helmet to a very large plastic basin, then attached battery-powered LED rope lights. It was incredible.
And it sounded like a lot of work. So I went the lo-cal way -- I found 100 glowstick bracelets on eBay for $7, and got a plastic bowl that fit my head at the dollar store.
This is how it looked as I was setting it up. To make the bowl light up, I would snap several glowsticks, then hook them together with the included connectors. Then I spiraled it up and taped it into the bowl. The tentacles were just taped to the edges.
The bracelets were flexible when bent, but they weren't loosey goosey, which probably would have been much more comfortable, because the tentacles kept hitting my shoulders.
To keep the bowl on my head, I used packing tape to attach a circle of elastic in the middle. To put it on, I would pull the elastic apart and slide it onto my head. The elastic kept it more or less in place. After about 3 hours, the elastic had stretched out enough that it wasn't really secure on my head anymore. If I reuse it, I'll just reduce the diameter of that elastic loop.
This is how it looked in the dark, as modeled by my not-quite-able-to-hold-still toddler. It actually turned out really well.