My boys are turning 7 and 10. Last year and the year before we had a combined birthday party for both of them at the Y. They both invited about 10 kids. It was a blast. Before that my older had a laser tag party 2X with some of his friends. The year before he had a playdate party at our house with 5 friends from Kindergarten. My younger didn't want any parties when he was in preschool.
We also have a family party, just the four of us. I bake a cake for that, they get their favorite food and we do something the kids want to do. For the past few years they wanted to go to Chuck E. Cheese. We don't have any relatives here, but if we did, I would probably invite them too (at least grandparents and maybe aunts and uncles)
This year my older wants a sleepover party with 3 of his friends and my younger won a Community Center roller skate party. Fortunately, not a lot of expenses for us this year.
If their birthdays were in September I would do an outdoors party, either in the backyard or at the park. We only did they Y in the past because our house is too small to have a lot of kids over, but in summer, when they can go outside it's perfect to have a party at the house.
I don't give a more expensive gift because the party is at an expensive place. I personally think the party places are way overpriced and we only did the party place because we were able to combine both of their parties and we were in the middle of moving and it was winter. I also feel bad when our kids get so many gifts. It's crazy and so unnecessary! But I didn't want to tell the invitees not to bring any gifts either, because I think the boys would have been very disappointed if they didn't get any gifts from their friends, since they brought gifts to their parties.
I'm glad we are getting to the age where they prefer small parties with their close friends.