The tournament is entirely optional. And while it is quite an event (bring the family, friends, and lovers), it does occur every month. Businesses in the capital don't shut down for it, but some in the villages do, for they do so to get their name out there. This is so that they might earn the right to do their business in the capital, where only those who are absolutely the best in their fields may serve. So the event is much more important to the villagers, specifically the business owners.
As for militaristic/patriotic, the Ebon Knights control everything, and they always come first. In the capital, and more peaceful villages, the majority tend to be very patriotic and supportive of the empire. There are exceptions where individuals are concerned, obviously. Now, Azure Strand probably has the least love for the empire. They are the poorest of the villages, and as such, receive little attention and oversight from the Knights. This has led them to become a time filled with crime and criminals, albeit operating in secret (no open crime) under the noses of the few knights there.
Stone Crest also has little love for the empire. They are the most recent village to be added to the empire, a short 50 years ago, and were not added willingly. Finally Silent Rise simply considers the knights to be weak and useless, so they tend to look at them with disdain. Ruby Banks, Green Fall, and Scream Watch tend to be quite patriotic.