I agree that a cold is not really a big deal, and I am not so fussed about my kids getting one (unless we are about to get on a plane, visit a newborn etc etc), but I guess the weird thing here is that someone ASKED me if they can still come. Ie they are acknowledging that their child has a contagious illness (albeit a mild one) and that in all probability it will get passed on to some of the kids attending, and asking my permission for them to still come. If they had just come to the party then what's done is done, but since they are telling me as host and asking me if they can come, it kind of puts me in the same position as if it was my kid that was sick and going to a party. Which I would not do.
If it was my child going to a party and they are sick I make the decision myself whether or not to take them, and just tell the host that we are not coming. It's the transferring of responsibility of deciding what is the right thing to do onto the host that seems unfair.