During the Party:
Give each guest a toy musical instrument, such as a flute, drum, xylophone, tambourine, or harmonica. Either have the birthday child act as the conductor and lead his or her 'orchestra" through various musical numbers, or have an adult do so.
For a special treat, invite a seasoned musician or local music instructor to come teach the children a song. Then, before the children leave the party, have them perform their musical number in front of all the parents. Then, allow the children to take their chosen instrument home as a party favor.