I would have allowed both of my kids to attend this party when they were that age. I would definitely have done one of thesewhen I first opened the invitation and I would never think to throw a party like this for that age kid.
That said, I don't think one party is going to harm them. If it became the thing to do every Saturday night, I would not allow it.
I would be more concerned with the parties in the future, depending upon what type of area this is. Some people would view this party as a challenge to one up them when it is their kids b'day. If I noticed a pattern, my kids would be looking for some new friends. One party like this just strikes me as one overindulgent mother. As long as this isn't a trend, I would be okay with it.
I agree with you as well. At 14 I wouldn't bar my child from attending one of her best friend's parties, and its a good opportunity to point out how "over the top" parties are becoming for kids.