Don't put a sad face! It can be fun!
First, you don't *need* a "theme", but if you want to, they are only limited by your imagination! Let me think.... 1st birthday... Shapes? Rainbows? Bugs? Flowers? Animals? Water? Fruits? Pinwheels? Ducks? Hats? Go nuts!
I also think one of the things that "cheapens" kids birthdays (besides the commercial themes and later the competative games, junk bags, etc.) is the ton of waste- paper and plastic tablecloths, dishes, silverware, cups, etc. It makes it feel like the whole thing is just a quick and throw away event. Which I don't think it is. It is a special day! This year, I went to the thrift /2nd hand stores and got REAL cloth tablecloths and table settings. I made decorations out of cloth and rope (which came out amazingly beautiful- I had them around the house drying and ds1 woke up and literally gasped in awe at how magically they transformed the livingroom). I plan on putting some dandilions in some jars for table decorations. It changes the whole feeling from paper/plastic temporary and throw away to a feeling of substance and investment and things being real when you ditch all that "party" waste.
I don't do loot bags... we do a craft that the kids take home. Last year, it was decorating canvas bags. This year we will make bird-balls out of seed and peanutbutter. In the past we have painted flowerpots, done tie-dye, and painted frames. I've also heard of people handing out burned CD's of their kids favorite music and gave that to take home. Brilliant! I've heard of some people giving a book. Nice!
We do fun cakes. They can be anything- whatever you like. We've gotten ours frequently from Wholefoods and they are great. But I could totally see carrot cake or apple cake... Cupcakes or whatever.
I've also made DVD's of each year from photos. It is super at a party when they are playing. I also try to establish some traditions. We have a special birthday flag... And the night before their birthday, I tell the story of their birth and we look at the pictures.
Really- once you free yourself from the patry store and take a minute to envision the real, best party... it can be great.