I always do my parties at home. I've been doing them since my oldest turned 3. She is now 8 and I have added 3 more kids to the mix, so you may consider me an expert.
I find games like 'Mr. Fox, Mr. Fox, what time is it", 'Red light, Green light' are great games, however they can't last very long (5-8min.) due to the potential of cheating after some boredom sets in for some kids, and this creates conflict.
I always go for a theme party, as it seems you have (some of mine, for other readers who may be interested, have been: bug party, pajama party, pirates do good deeds party, princes party, popcorn party, penguin party (I realize they are all p words, my daughter decided every party needs to start with p :))
I go for age appropriate crafts, and quite a few of them.
My party runs for 1.5 hours and goes something like this (for the younger kids, as you are talking about):
1. As they come they choose 1 (or more than 1) out of 3 stations. They are usually a beading project, playdough or legos, and some gluing/ sticker project. (all theme related). You will need an adult at each station to help, explain, and ensure that the child's name goes on their projects.
I have set up a line of bags with the kids' names on them where they can deposit the projects as they go. If they are too gluey they just put it in front of the bag.
A group project, which is a bit harder.
I get all the materials from www.OrientalTrading.com, a great site for stuff like this (and goody bag materials)
Any other questions or specific ideas for your party, or details about mine I will be happy to share, just let me know and I will add them to this post.
Good luck, and most of all have fun, if you do so will they.
oh- I also have a book prepared (on theme) in case we have that extra bit of time.