Sounds like you've gotten some good advice already. I agree with what everyone has said so far. The best thing to do is keep it simple at this age. Consider your budget and make plans around that. You don't have to spend a ton to make your little one feel special. Make sure you choose the best time in the day - if he's better in the mornings - invite your friends or family over for brunch. If he's best right after naptime -do it then.
My 2 yr. old's birthday is in October and this year we went on a hayride with grandma and grandpa and the aunt's and uncles at a local farm. We picked out pumpkins and carved them and had some pumpkin shaped cupcakes back at the house. It was really fun and not too overwhelming.
If you do opt to have a "friends" party, consider doing it more as a playdate during the week (if most of his friends aren't in daycare). I did this for my 4 year-old this year and it was great. She had her friends that she usually plays with over for a safari party. It was low key and really fun. You have to be extra-planned (I had a time schedule) and keep it right around two hours.
For some really fun birthday ideas, check out Family Fun Magazine's website. Their recipes are simple and their activities are inexpensive and easy to figure out. Our parties has really been enhanced by some of the ideas they suggest.