MrsOverTheRoad I agree, you should not have a child to sleep over and your dd should not go to the other house. Eventually it will all work out.
"What am I meant to do? Tell the "rejected" friend's Mother "DD says no" or lie? Or am I meant to refuse DD a sleepover with the mate she WANTS to stay with...incase she hurts the other one?"
If you are genuinely asking, I think IMHO if you want to be kind you should tell the other mum your dd likes playing with her daughter but doesn't want her to come for a sleep over or to go to her house for a sleep over. You do not need to give any reasons and you can just say it very plainly as it is.
Then you can make plans for your dd to have whatever sleep over she does want with her other friend and vice versa. We always have only one friend for a sleep over, except for one NOISY party sleepover.
The other mum will hopefully stop asking. My dd has a friend she likes a lot but the other mum had never been keen on sleep overs, she told me, and I accepted that and when my dd asked if soandso could come over for a sleep over I said I'd talked to the mum and it wasn't possible at the moment.
I have no idea what the reason was but I do know when dd stared having sleep overs some kids were sill bed wetting etc and that was an issue, and some parents did not want to reciprocate (and I think that may have been the case) so I'd never pry as to why such a plan was not on.
Said has since been for the big noisy sleep over and slept peacefully through the biggest loudest sleep over ever!
As a mum I would much rather be told that something is a no go than to keep asking because the other parent is evasive.