You aren't the first parent who got themselves into a pickle like this.:)
I try to make the consequence relevant to the actions that needed correction. Your five year old lied because she knew she was getting into trouble for sneaking candy. I think my response would have been "No sweets for you for X amount of time." and a discussion about how not telling the truth damages your trust in her, and this has a great consequence: she should have to spend the day playing within *your* sightlines, wherever you need to be (except the bathroom,unless you are cleaning it) and spend their day next to you: when you do laundry, she would have to be in the laundry room with you; when you cook, she would have to stay in the kitchen, etc. She doesn't get the fun of doing things "with" you, but must stay in sight. My sister did this with her son and his conclusion was "Mom's really boring and I want her to trust me again."
When it comes to writing on her sheets, your older daughter would either need to buy new sheets out of her 'fun' money (does she receive an allowance? For the near future, half of her weekly allowance could go to repaying you for the replacement of damaged property.) The other option would be that she would have to 'live with it' until you were ready to buy new sheets again, whenever that is. Personally, I'd have her replace the item because you don't want to have a reminder that coloring on the sheets is tolerated.
Or a third option would be to hire a babysitter during the party and let them be in one part of the house-- no fun, no tv-- and tell them they must stay there. Here's the thing-- you made an impression with the grounding, but it isn't relevant to what they *did*. Writing something 20 times isn't always helpful, either, esp. for a 5 year old.
If it were me, I'd have a discussion with the girls; let them know that you picked the wrong punishment (but not why you feel it's not going to work-- don't undermine yourself by explaining this to them) and that you've thought it over and This New Plan (whatever you decide to be the consequence) is what's going to happen. Be clear that they don't get to 'go back' to the grounding because they don't like the newer consequences, you are the parent and you are not "negotiating" a consequence for them. I think you might find that the consequences I suggested will make more of an impression on them, too. And no, I would not set a precedent of letting them 'earn' their way back out of the punishment you suggested. If it were me, I'd realize that I had likely been angry when these things happened, had acted hastily, and should just change it from a punishment to a consequence instead of providing loopholes which, in real life, don't usually exist with punishments.