Wow- the first responder to this question should really consider the fact that kids need social experiences outside of the school day. With the increased curriculum demands placed on our children, there is very little social time during the day.
Having said that, I intend to use my parents' model. We did not go to non-family playdates until Kindergarten and no overnights until second grade. The contingency here was that my parents always invited the other family over for a barbecue or dinner so that they could get to know them and meet them before allowing us to go alone.
They did the "stranger danger" and "good touch/bad touch" conversations with us regularly and always made sure that we knew to come to them if something didn't seem right. They promised to pick us up immediately if we wanted to come home and they did, even into HS and adult years. At a party and kids are drinking and uncomfortable... picked me up without question. It's about establishing parameters and mutual respect for expectations.
My mother always called the other mother directly to arrange playdates/sleepovers and to make sure that a parent would be home at all times- we were not allowed to be left with someone's sibling or babysitter. There were rules and we knew them.
"Uncle Chester the Molester" could live next door, attend your church or synagogue, or be related to you! Teach your children to be safe and aware, don't scare them or shelter them too much- they will be ill-prepared for the world in which they live.