We do pretty much anything we want to at ours. It's like having a get together with friends, so whereas the games we play are competitive and we usually go there to test decks for tournaments or the next format et cetera, we go there to have fun more than anything else. Plus, most of the time, anyone is willing to help you build a deck by trading and even giving you cards to make your dream deck.
As for watching people play games, of course you can! You're well within your rights to observe a game, unless they ask you to leave. Only at a tournament are you infringing on their game if you sit and watch, and even then. Plus, if they ask you to move away, it's probably not a game you wanna watch anyway -- they're being a bit too stuck up about it, and it wouldn't be an entertaining thing to watch.
Also, don't worry about not having a deck; it's more common than you think. A lot of the people who come to our league are there for trading, playing the video game and hanging out with friends. Even so, at the league I go to, we even have some theme decks on hand that you can use if you don't have a deck, with the stipulation that you have to bring them back after you're done, much like our league's namesake: The Battle Factory.