M.L.
Just invite her, if she doesn't show, it's her loss but you are the bigger person that way, and you don't have to have guilt over it in retrospect. Also, she may bow out now, but years down the road may decide to be active in the family again, so it's always a good idea not to burn your bridges and at least keep some communication open.
One thing I have learned, is never ever have two separate parties for different families who may not like each other... it turns into a big hassle every year and can get expensive too. Every needs to learn to accommodate and put hurt feelings aside, and to be there for the children.
I have been to parties where ex's and new husbands and former husbands and mixed kids were there, and it may be uncomfortable for a few, but so long as people mind their manners it usually turns out fine. You can just warn certain people if you need that so and so will be there, so please be as friendly as possible. Usually they just end up ignoring each other.
I don;'t think the kids will only think of grandma as a holiday thing, you never know, it may invite her back, and at least the kids will feel special if she chooses to come. If she doesn't come, do not make a big deal out of it in front of the kids.
