What was the name of the band playing in Salem Marketplace, MA (in
front of a bar, near the Lobster Shanty) on this Halloween night ?
They were playing around 9-930pm approximately.The lyrics of one song
had a corus "The sky is green and the grass is blue" and the lead
singer (female) also played the bass.

Hello--

I have the answer to your question. 

The name of the band is "Professor Gas Can." They were playing out in
front of the Kalifornia Cafe, which is near the Lobster Shanty. The
woman you mentioned also performs in another band that played that
night called "Three Toad Sloth." She performs in a third band (which
didn't perform that evening). The third band is called "Vein."

I got this information by searching for the phone number for the
Lobster Shanty:

Lobster Shanty    
25 Front St
Salem, MA 01970-3707
Phone:(978)745-5449

I spoke with a lady who works there who knows the woman personally.
She says it's a great band. She knew exactly what you were talking
about.

You can read the band schedule at the Kalifornia Cafe's web site. The
link is http://www.kaliforniacafe.com/entertainment.htm#october

I hope this helps! If you need any clarification, please don't
hesitate to ask!

darrel-ga