Real Simple and they have a couple other cute party theme ideas on their site. I think this is a cute idea for a simple, budget friendly kids party. They gave some great ideas for decorations, food, and games that are listed below.
To create a café vibe, cover tables with checkered tablecloths ($15 for 12 disposable 52-by-90-inch cloths, orientaltrading.com) and string white holiday lights and a red-, green-, and white-striped garland ($2.50 for a 12-foot garland, theitalianamerican connection.com) around the room. (If you have leftover Christmas supplies, such as paper streamers, utensils, and the like, they’ll work well with this red-and-green color palette.) For place mats, make color copies of the Italian flag (click the "Little Italy Place Mat" icon at realsimple.com) or a map of Italy. Let kids channel the Super Mario Brothers with stick-on paper mustaches (click the "Stick-On Mustaches" icon at realsimple.com).
Set up a make-your-own-pizza station, where guests can create their own edible masterpieces, featuring pepperoni smiley faces or hair made of Cheddar cheese. Each child receives his own prebaked mini pie, made with store-bought refrigerated dough, and chooses from a selection of toppings. Time for dessert? Serve individual scoops of gelato or ice cream in paper cups and allow kids to garnish with various toppings, like red and green sprinkles.
Pin the pepperoni on the pizza. Download the game board by visiting Realsimple.com, or create your own version using felt or poster board. The kids, blindfolded, get five points for pinning the pepperoni on the center of the pizza, two points for placing it directly on a slice without touching a line, and one point for hitting the crust.
Hot Tomato. Just like Hot Potato, but with a tomato.
Meatball race. Kids form teams and deliver a “meatball” (a golf ball or a racquetball) on a spoon to a designated location and back without dropping it.
Bocce ball. Each player gets a ball (or a beanbag). One person throws a starter ball roughly eight feet ahead, then each child tries to throw his ball as close to the first ball as possible. The closest wins.