Good morning C.,
Your daughter is probably too young for a children party; however, I remember making my son's favorite foods, balloons (which by the way, we used to practice catching balls with since he simply couldn't do it until the balls came to him "slowly" -- we moved up to real balls over the years), maybe a crown she can help make.
As my son grew older, and we did have parties, I didn't give out gift bags (it was Tony's birthday, not everyone's), we had treasure hunts, sprinkler parties (no pool parties since I worry about drowings), pin the tail (only I used a homemade poster for the cartoon character of the moment -- ie. put the pants on Sponge Bob), make your own sundaes, .... and as he grew older, we'd take a few friends to a movie and pizza, sleep overs .....
One party I went to for a friend's daugther was a "tea birthday party) where the girls all did flowers for their hair....
I don't think it matters what you do ANYTHING to make the day feel special.
As for your 3 1/2 year old feeling jealous -- which she will .... just remind her her birthday is coming up.