I had to laugh reading all the responses to this thread, because I am
totally planning a giant hoopla bash for DD's first birthday! I'm still working on getting DH on board...

I certainly wouldn't plan giant parties for
every birthday, but for her first, I think it's ok. I figure that we have such a huge community of friends and family who have supported us through the past year, and it's a nice way of thanking them all. Sort of a "our kid made it to her first birthday, thanks for helping us make sure she survived her first year!" IYKWIM. However, it's not going to be a fancy party, just a lot of people. We'll probably ask people to bring a potluck dish in lieu of a gift, or maybe ask people to consider specific gifts (like donations to her college fund - I know I know, boring, but practical). Our church has a big social hall that we can rent for close to nothing. Oh, and if I had a sensitive child I would
totally not plan this kind of a party, but she's used to big gatherings and loves to be the center of attention, so I know she'll handle it just fine.
My niece's first birthday was a big affair at a local country club, with themed custom-designed decorations, cake, and party favors. We're
not going that route.
I think your party sounds great! 1-2:30 pm is an awfully short amount of time, though; is there any particular reason to keep it so limited? Why not just set out some bowls of pretzels and board games and let people relax? I think you'll feel less stressed about the party if there isn't such a tight time limit on the "activities." I know I don't like going to parties that are specifically designed to be brief - I feel like I don't get the opportunity to relax into the gathering, sit around and chat, etc. It feels too forced, if it's too short. Just my $.02...
Are you worried about having so many people in your small house? Can you move furniture out of the main room to allow a bit more space? Can you designate a bedroom as a play area for the little ones? That might allow a bit more breathing room in the schedule AND the space.
First birthday party activities should include:
- everybody arrives, coos at birthday girl/boy
- everybody gets a drink and hangs out for a while
- light meal is served (sandwiches and fruit salad on paper plates in the living room are totally acceptable)
- after everyone eats and dishes are cleared away, people make a big fuss about putting birthday boy/girl in high chair atop a large tarp or newspapers
- "happy birthday" is sung and baby blows out candle on birthday cake with help from big cousins
- baby happily smashes cake to bits while everyone watches and takes photos
- birthday cake is served to everyone else
- baby is cleaned up and tarp bundled away.
- baby opens gifts
- baby and big cousins play with gifts while adults hang out
- baby has a meltdown and takes a nap; everyone else goes home.
You can easily fill 3 hours or more with that itinerary!