You could certainly do two parties, but that seems inconvenient for you. Drive an hour to use someone's house? With the price of gas, the community center is probably about equal! Two parties would get pricey as well... again, back to the community center cost thing. Two cakes, two sets of meals, gas tanks to and from your sister's house... for everyone.
What about having it at a local pizza place? Invite everyone to come for lunch or dinner. Serve pizza, salad, garlic knots and cake. You could hire a balloon person to come and do balloons with the kids. My son went to a party recently with a huge age range, but they ALL loved the balloon guy! You could hire a magician or a face painter instead if that's more of what your little one would like!