being blunt. screw your mother in law! It's not her birthday - it's your DD's! if she can't suck it up, then she shouldn't show up! you don't have to play peace keeper and you shouldn't have to pick who you invite to ensure feathers aren't ruffled. This is about K, not MIL!

with friends - can you have two smaller "gatherings" - a party for those K is close to, and then a less formal get together somewhere to celebrate with your friends? You can just be honest. Sorry, we have limited space (and money) so can't afford to go all out for her party, how about we meet up at such and such and we'll buy a cupcake for her or something?

as for SIL - is there any way you can invite the kids and not SIL? My DH's family are more screwy than yours could hope to be lol - but the adults don't define the kids. The adults know they are not welcome in our home in any way, but the kids are included in some things (DD's baptism etc) - we simply sent them the invite with a statement of "if the kids can come, such and such will pick them up and drop them off after the party". They don't know where we live now, and i'm sure as hell not going to let them turn up so we have to do things this way. it's something to ponder... SIL might see it as a perfect opportunity to get a couple of hours break from her kids and it might work out ok...