I would make the walk. It's fun to walk down the streets and see everyone dressed in red, students milling about, etc. You might want to leave a bit early and grab a brew before you head to the game.
If you're staying near the Capitol, get up early and hit the Dane County farmers market on Capitol Square. Sample the local cheeses (remember...you are in Wisconsin!), get a cup of coffee and a freshly baked Danish. Actually you should do this even if you're not staying near the Capitol. The farmers market is one of the biggest in the country.
Postgame, hit up any of the bars in town. Be warned that many of the bars on State Street will be filled with students, and make that double since it's Halloween weekend. If you're near the Capitol, visit the Essen Haus where you can drink from a boot. At any time during the weekend, visit the Memorial Union (Union South is near the stadium, Memorial Union is on the other side of campus). Get an ice cream or a beer, sit out on the terrace and enjoy the lake view.
Halloween has become a lot more subdued since the city got tired of people coming in from out of town and trashing the place, so they've really clamped down on the action. It's still Madison, though, so be prepared for a party. Not sure about State Street on Halloween night this year, they usually block off the entire street and charge admission.
