Well if this one's not right up my alley, I don't know what is...
The Story of the Haunted Horse on the Frontier Town Carousel. (If you haven't already done so, turn out all the lights in the room)
MANY versions of this story exist, but in the one that I heard, the carver of the carousel came home from work early one day to find his wife in the arms of another man. Enraged, he killed her, using a pistol and a sabre. Sounding very similar to an Edgar Allen Poe story, the carver conceiled the murder weapons within the cavity of the body of one of the horses he was carving. He then finished carving the horse, but carved the pistol and sabre on the outside of the horse, as something of a confession.
The horse was supposedly haunted by the woman's spirit. During the last ride of the night, the woman's ghost could be seen riding that very dark brown horse. Another version said that after the park closed, the ghost would appear and the band organ would suddenly blare its music, the lights would all go on, and the carousel would spin, with HER on the horse.
Also, it was supposedly impossible to take a photograph of this horse without the picture being blurred...you know, the horse was still moving or something.
This urban legend began circulating in the late 1970's as I recall. The story was finally picked up in the media, featured in the magazine Carrousel Art (now defunct) as well as the Cleveland Plain Dealer!
The Haunted Horse was removed from the Frontier Town carousel prior to its departure to Dorney Park. The HH currently resides in the Town Hall Museum at CP.