Can dementia cause hallucinations or visual disturbances?

Not exactly. Hallucinations or visual disturbances aren't symptoms of dementia, per se. However, patients with dementia may experience hallucinations or delusions if a delirium or other cause of these symptoms is superimposed on the dementia. Delirium develops over a short period of time (usually hours to days) and tends to fluctuate throughout the day. Patients with delirium often respond well to treatment.
It can happen. The most common type of dementia is alzheimer's -- patients in later stages can have auditory/visual hallucinations. These may predict a more rapid decline of cognitive function. In lewy-body dementia (2nd most common type), 80% of patients have visual hallucinations. Patients with new onset of hallucinations need urgent medical evaluation to find and treat reversible causes of delirium.