Thanks to all of you for your advice. Let me clarify a couple of points. The young man’s family isn’t threatening to call off the wedding, but they’re saying that if it doesn’t meet their standards, only their immediate family will attend. This in itself doesn’t bother me, but I want us (and especially my daughter) to have a good relationship with them. To start off a marriage with angry in-laws is surely a problem.
I’m aware of the potential kashrus issues, and whoever caters it will have to meet our standards. The same is true of tznius as far as we can control that (we can’t enforce a dress code, but we can nix mixed dancing). These issues are simply not negotiable.
His side suggested that we just invite close family since we can’t afford $120 a person. The idea of cutting out our daughter’s friends and our friends is very upsetting.