My eldest actually did have a notion about birthday parties when she turned 2 - she was quite precocious verbally (all evens out over the next few years but at coming up to 2 her language skills were very strong) and I was lucky to have a really supportive, close antenatal class group with whom we'd continued to spend large amounts of time. DD was the last baby born in the group and by her birthday she'd been asking each evening for a while whether it was her birthday party tomorrow! She very much expected her friends to be there. Which was a bugger as we moved abroad just before her birthday 
We used her birthday to get to know the neighbor's and threw a party on the drive with borrowed tables and benches (also tiny garden) and with the house open, and invited everyone we met with toddlers in the village playground, and had lots of people there, including toddlers, but not her "friends". She was absolutely satisfied that a birthday party had occurred 
Bit unconventional but it's stood us in good stead with neighborhood relationships for the nearly 12 years since so it was worth it. Made a big impact especially as I was 38 weeks pregnant and had dc2 the next day 
I think 2 year old's parties can be used to entertain family or parents friends but it depends what sort of 2 year old you have - some are basically toddling babies and others are spooky little mini humans with their own slightly odd expectations...
If your DD will have been to lots of your friends children's wild toddler parties in the weeks immediately before her birthday she may, or of course might not, have her own funny little rigid picture of a similar thing happening for her. If she's that kind of nearly 2 year old I'd rustle up a few toddlers to attend and a little paddling pool or ball pool and mini toddler slide or similar. You can do that with the family party, it doesn't have to be either or at 2 (the way it definitely does have to be either or by school age).