I really don't understand this.
I come from a big family, lots of cousins, not all of whom are blood related.
My grandparents, parents, aunts and uncles have NEVER differentiated between their blood related grandchildren/nieces/nephews and those that became a part of our family due to marriage or their parents co-habiting.
All were treated the same and referred to as they would be had they been blood relations. The cousins I get along best with include 2 who weren't part of my family until I was an adult. I have blood related cousins who are arseholes and I take little to do with. That continued even after the couples split in 2 cases as they had always/Long been raised/treated as part of our family and excluding them simply because the adults were no longer together would have been cruel and effectively punishing THEM for their parent and step parent separating.
I also have a dd who has a stepmum who has never been anything but kind and lovely to her. Even with her dad being a total deadbeat fuckwit, her stepmum always sends cards, presents, they stay in touch on sm, talk on the phone - the only reason she doesn't see her and her siblings from that relationship is because of aforementioned fuckwit! When ex was still seeing dd and dd Her stepmum and siblings there were even times I had the siblings for them to spend time with dd and we did picnics and days out. And that's even though the eldest is the product of exs affair with stepmum (who was supposedly also a friend of mine. I wouldn't say we're friends now, but once we dealt with the initial issues we managed to be friendly/civil with each other - fuckwit ex hates that 😂) dd is even friendly with and gets gifts and cards from stepmums parents and siblings.
If I were you, quite honestly I'd have expected my partner to have nipped this in the bud far earlier than this.
Atrocious way to treat a stepchild particularly one that lives with their child/sibling and one would hope is treated within their own home exactly the same as the child that's blood related to them. So quite honestly I don't think much of your partner either.
There's a family anecdote about one of my grandparents aunts differentiating between my parent and their siblings for a different reason and my grandparents immediately made it clear that wouldn't be happening again. It involved gifts and an arranged day out - but not for all the children. Grandparents said they either treated all the children or none (said relatives tried to claim lack of funds was part of the reason but really they were playing favourites).
Your dh needs to say to his family they either treat both children the same or don't bother!
If it's a child free wedding (something else I don't agree with, all our family weddings were just that FAMILY weddings, I've never been invited to a child free wedding even when I didn't have DC) then neither dd invited - they can't have it all ways. Frankly it sounds like they only want younger dd as a photo prop anyway! A cute flower girl in the pictures.
My own wedding had loads of kids. Possibly outing but we even had a photo that was me and ex with just the child guests, it's one of my favourite pics. If it had been up to me I'd have had mostly child guests. They were all well behaved and loads of fun and very respectful and helpful to the older guests. Ranging in age from a few weeks (that one was an unexpected guest as was born a few weeks early, mum had expected to be 39 weeks at wedding) to 15 years old.
But no, that is shitty treatment of a child.
Personally I'd be saying neither child is going.
What they're really saying with their actions is that dd1 isn't "good enough" for their family. Awful people.