Okay, I have been doing some searching and came up with the following for the party bags:

for babies under 2:

a book
a music CD (I have ones that I can copy etc..)
something musical maracas, tamborine etc..
a balloon
bubbles
and a few lollies

for older kids:

bracelets for girls
squishy ball thing for boys
music CD
stickers
lollies

am still searching so will let you know if I find any other good ideas??