Touchy wedding situation - ideas?

DF's dad and step mum have offered to throw us a reception - which is extremely generous of them. It'd be an intimate one with immediate family (including DF's mum and her husband - should they choose to attend as it's a Tuesday wedding and they live interstate).

Initially we were planning on just having a meal at some hotel - where everyone pays for themselves - no presents in return.

First concern is that my parents aren't the best off financially and I don't want them to feel bad as they can't contribute, so any ideas how we can tackle that situation? We think we may have to tell a lie and say that we're paying - however DF's step mum is organising it for us (as we would have just had our second baby 6 weeks prior). Is that a bit 'off' to do that?

Second concern is as DF's dad and step mum are paying we are limited in who is invited to the reception, and previously I've mentioned to a few people 'come along - and it's a pay for yourself at a hotel afterwards' - keeping it informal. E.g - we're able to pay for aunts and uncles - but cousins we can't. Any tactful ways we can get around this?
Is it too cheap to say we can only pay for Uncle and Aunts but cousins will have to pay for themselves???

Tell your parents the truth. Lying to your family can just lead to a world of hurt.
You'll be able to find jobs for them to do where they don;t have to contribute financially, like helping you to make invites, or something (my mum helped me to make my dress, ironed it for me, then threw a brunch the next day - a lot cheaper than what dad or the ILs threw in, but still really important)

I went to a wedding a few years ago where aunts and uncles only went to the reception. The rest of us took off to a local winery, got on the sauce, then the bride and groom came and met us up afterwards and we hit the town. Messy, messy night, but SOOOO much fun! It was a great way to do it.
But if you have to exclude too many people for budgetary concerns, then maybe go back to your original plans.

You'll know what best suits the people close to you. Go with your gut, and do it for you and your DF not for anyone else. Be strong, it's the best way to get a great wedding.