Since we have a family celebration for the girls for their birthdays, I've limited the girl's friend parties to every other year. This was Thing 1's 2nd friend party. We just had it at home, with several games and things we've seen from pre-school and other parties. One of my favorite things was filling squirt guns with colored water and letting the party guests paint something painted on fabric on the clothesline. Thing 1 had a "pony" themed party, so Hubby painted horses and the kids got to squirt them.
We also did a pinata, we've done one for nearly each birthday party and the trouble is getting the darned thing open. We usually let the kids whack until they're tired, then just rip the thing open.