I think the combined party is a great idea, even though DD1 has ideas for the party maybe DD2 can help PLAN the party, she can help DD1 choose decorations, where things might go etc?
Make her feel involved in the process even though DD1 might be getting more of the overall choice.
Maybe compromise, DD2 can choose the pinata and some of the things to go with the games, ie. toys for pass the parcel etc?

I'm sure they would BOTH love playing party planner and can be be as much involved as you like.

Have fun with it, am planning my DD's 1st birthday and i am over it already.. bring on Saturday!