półtora/półtorej - do they decline?

Do these 2 numbers decline? For example if I want to say About 1 and a half milion people live in this town would it be correct to say:

W tym mieście mieszka około półtora miliona mieszkańców.

Yes, your sentence is correct.
"półtora" is used for the masculine gender and "półtorej" for the feminine gender.
In your example you have "mieszkańców" - this is the masculine gender thus "półtora" is the correct form.

So after the preposition około the word półtora doesn't change. For example if I had said dwa miliona I would have to change dwa to dwóch I think? (genetive case after około)

około dwóch milionów

Anyway, the incorrect use of "półtorej" (also for masculine nouns) is one of the very annoying (for my ear) mistakes made by Polish native speakers, quite common in recent years.
I guess it comes from the fact that the most common combination used is "półtorej godziny" (1 and a half hour), so people hearing it quite often automatically relate the form "półtorej" to all nouns.
So, don't be surprised if you hear/read Polish people saying/writing "półtorej roku" etc.