I don't think so, but if you really want to, you can buy squid eggs and place them in town and farm them and hope for the best EDIT: A little more elaboration, squiddies don't spawn naturally in town, similarly to iron golems and well, every mob.
Hostile mobs cannot, regular mobs can. For example; a villager farm works perfectly in a town. And you can also help mobs spawn babies by breeding.
Squid spawns were disabled a while ago though, so they are only(?) passive mobs that can't spawn in town.
regular mobs do not regularly spawn. Only if a player breeds them. I was talking about regularly spawning. That is because they are breeding. They never spawn as they would in a newly generated NPC Village. That is breeding. I am talking about Spawning. 2 Completely different things
Doh.. you are so right SO I shall now try to steer the peoples attention away by doing a funny dance <does a funny dance> Hmm, this worked in the movies... odd...