Use your common sense when it comes to the 3+ issue - on a lot of toys it seems to be there to cover the manufacturer rather than because the toys present a real risk!
Things my 2 year old had enjoyed in party bags include stickers, small plastic animals (think Early Learning do reasonably priced tubs of these), something to eat (he's as happy with a box of raisins and some organix crisps as chocolate or sweets!), and a balloon. Also things like plastic/wooden bracelets or watches always a hit. And windmills. Sure there are lot s of other things you could do, will let you know if I have other ideas.
And enjoy! I know you will spend the rest of your life making party bags, but if you are going to have any more kids, this might be the first and last time you have time to enjoy doing it!