DH and I made a decision early on that we wouldn't go over the top on birthdays. Some years we do a typical kiddy party, others have been close friends, one was just dinner at home with a simple present. I think setting the bar low makes it easier on everyone. That way, friends and family don't always expect a big to do and neither does your DC.
This year my DD (7) wanted to go to the mall play area. Afterwards we went to Build-A-Bear ($25) and then had dinner at home. Her menu choice: homemade mac n' cheese, watermelon and strawberries. She had fun, I didn't have to plan anything or buy a present in advance and she's still talking about!
It's tempting to go over the top on birthdays, but I think at the end of the day it's about acknowledging another year in your child's life. Do it in a way that she enjoys and you can afford. Who cares if people are offended? It's her day, not theirs.