Sicilian Babe,
You're SO not being oversensitive and it's gotta be one of the rudest things I've ever heard of in my whole life.
You're right, if the not came WITH a party invitation and donations were requested in lieu of gifts, that would be perfectly nice. Depending on location, a weekend at a B&B is on average around $145/night. So figure a 3-day weekend were arranged, it would come to around $500 with tax. Unless there's a misunderstanding somewhere, the daughter is either unable or too cheap to afford to treat them to the weekend, which actually would come out to far less than throwing a party.
Which she's apparently not throwing either!!
Since as you say it is a relative, you'll probably want to give a call and make sure she's asking what you think. If yes, then I'm not telling you how to handle, but sure can't wait to find out what you decided to do!!
Apple
ps - Just curious to know how old is the daughter? It's possible she just doesn't posess enough knowledge of social etiquette to understand how these things are done. But still, youth would be little-to-no excuse.