Since you used the word, "Princess", you could have them make their own hair accessories. Get stuff to really bling them out - then it will fit in with a princess theme.
Along with the princess theme - anything with glitter and glue will be a winner. You could cut out the large construction paper into crowns, and have them decorate those.
Also, beads. Beads and string and/or jewelery elastic. Bracelets, rings, head bands, and necklaces... can't go wrong there.
You could go with "healthy, yummy food". Then, have them paint and glue different pastas to paper to make a picture. This can be very similar to mosaics.
Go to the dollar store and let your imagination run free. You can find just about anything there that will create a fun, inexpensive party if you are creative enough!
Since you are thinking about a taco bar, (and making their own cupcakes), those are two "crafty" things within themselves. Just take photos of them making their stuff and email it to their parents. Then, focus on games... pin the tail on the donkey, musical chairs, a dance-off, etc... Little kids love to dance - they don't get embarrassed for a few more years! :)
Good luck, and happy birthday to your precious daughter!