N.,
My son's birthday is one week before Christmas, so having a party can be a challenge. This year he invited 7 of his classmates from school (only three were able to come) but I clearly marked on the invitation "please no gifts". I think birthday parties should be about spending time with your friends and enjoying the day, not about who gave the most expensive, and coolest gift.
My son picked a pirate theme, so we had the following games and put their winnings in white lunch bags with their names written on the front.
Treasure Hunt to find the pirate coins - I hid enough coins so each child could take home 4, after they found their 4 they had to sit down on the carpet and wait for everyone else to finish. If one child was having trouble, the rest of the children had to help him/her out without touching the coin. This showed true cooperation.
Pin the Treasure on the Treasure Map - I found this game at Party USA for $10. Each child had a treasure chest sticker with their name written on it and they had to try to cover the X on the treasure map with their sticker. We actually had two ties, so I let the two closet children pick out 2 coins each from "My Treasure Chest" and the other two children were allowed to pick out 1 coin each.
Decorate the Christmas Ornament - I purchased a set of inexpensive markers and wood ornaments from Michael's Craft Store for the kids to decorate. They had a ball!
Cup Cakes and Ice Cream - I didn't want to make an entire cake, because my son has food intolerances and his cake mix is really expensive, so instead I made chocolate and vanilla cup cakes. It contained the mess and I lit a pirate treasure chest candle on the top of my son's for him to blow out.
We also had a family birthday party with the grandparents and his aunt and my son received gifts that day.
I don't think we'll have a kids party next year, probably once every two years, but we will do something fun. A friend of mine does not give her daughter gifts for her birthday, instead she takes her to a water park for the day and the entire family spends the day together.
I hope these ideas are a help. Good luck!
-C..