Yes, I do agree that I probably wouldn't have sent a letter, I would have gone over to the house and confronted the family in person to talk about it. There is a way to do everything, and if the girl didn't want your niece there, then they should have taken her aside quietly and told her, they didn't have to embarass her! although, I have never heard of someone inviting someone to a function, then telling them to leave. If I had wanted to do that at a party of mine, my mother probably would have embarrassed me in the middle of my party. The party girl's parents should have told her to suck it up and deal with it, you invited her, you let her come. She could have just ignored her, she didn't have to even talk to her, but to embarrass her in from of everyone, that's just unacceptable. If for some reason, your niece and the party girl had some sort of falling out, don't you think your niece would have not wanted to go? It seems to me that she was totally blindsided by all this and it was just some sort of sick joke, which really makes me ashamed to be a human right now.
I still would have went inside an made an even bigger scene. I would have found out what the issue was. It's possible the mother and father didn't know, and only crazy grandmom felt the need to back up her grandaugther, I wonder if the parents knew and hopefully would have been horrified by both of their actions. If they all knew about it, I would have embarrassed them letting them know just what type of low life's the WHOLE family is, I am sure they would have been embarrassed in front of their friends, I don't know too many people that would approve of something like that. I would have turned it around on them. The spoiled party girl would have been the one to be embarrassed to go to school the next day. It's a shame how most victims of bullying are the ones who are shamed, as opposed to the bulliers. They are the ones that should be ashamed!