I have a 3 1/2 year old that sleeps through the night for the most part, but I would not let her have a sleep over somewhere I was not (other than a grandparents house). She is too little to care for her self or to know right from wrong....like wondering out of an un-fenced yard.
I would simply tell your friends that it's not them, it's you and you are just not comfortable because of her age. You know she'd have fun, but sleeping over is off the table right now. She is still going to attend the party and get to play with the other kids. When you decide it's time to go, you all leave. Don't make too big of a deal about it with your friends or they will start to over analyze your decision.