We had a dress up princess party for my grand daughters 3rd or 4th birthday too. We had it at the park and I bought the crown foam kids from Hobby Lobby. I provided the glue, the glitter, the kits, the markers, etc...and laid them out on the table for each child to make their own foam crown, it cost less than $10 for all the kits and extras, some I did have on hand though.
I have over 10 years in child care and know how important dress up is so I have lots of old Halloween costumes, fancy dresses from thrift stores, princess shoes, etc...and I took tubs full to the park, each girl was encouraged to bring their own dress up stuff too. I took yards of cloth for the boys to make capes out of and several pairs of scissors to cut it with. we used old brooches, big pins,etc...to hold them together at the throat. The boys basically had capes and crowns to be kings. They could have made some scepters out of downed tree limbs too but we only had a few boys.
My 20 month old grandson had a lime green one piece outfit (I made it off Simplicity pattern 3663) that he was going to wear for Halloween and be a parrot, we made a different hat and put frog eyes on it and put a little plastic bracelet on it and he was a frog prince...it was so very cute.
At 3 years old the boys will use their imagination a lot and be able to improvise their own costumes with just a few basic supplies.
We had a castle cake I made with a kit from Hobby Lobby that was very easy to decorate. I don't do party favors, they get cake and stuff and the crafts they made.