S.,
We had some friends that got all excited about their daughter's fourth birthday party. They went all out with inflatable rental, pinata, BBQ for 40, the works. It was a lot of fun for everybody.
But there were two things that came of it that our friends didn't bargain for. #1 It set a precidence. It was the expectation that every birthday for both their children should be that big, if not bigger. How could they go back to small and simple?
#2 It set an expectation. Their daughter didn't even appreciate all they did and spent on her behalf. She just expected bigger and better every year.
What you do for your child is your choice. Is it too much money? That depends entirely on how much money you have. I would ask myself "Do I want to go bigger and better than this every year for both my boys?" If you are up to the challenge and money isn't an issue for your family, go for it. If it looks like this could wear on you after several years, go simpler. Just have a family date to the zoo or take one friend or one other family. Or have a Diego party at your house with a handful of friends.
Good luck,
S.