I’m from the Deep South, and I don’t think I’ve ever attended a wedding reception that included a formal, seated dinner. It’s always a buffet-style affair. Sometimes there is enough seating for everyone at once, but more often people share the tables; the younger folks might sit at a table just long enough to eat while the older people tend to sit for the whole evening. It often works out that almost every table will have a couple of empty seats at some point, so people can bounce around a bit and visit with their friends and pay respects to their elders.
If there is to be dancing a couple of large tents will be set up for a dance floor and bar.
Rehearsal dinners, on the other hand, are usually seated affairs, although the food is often served buffet style. My view is that if means permit the groom’s parents should invite the out-of-town guests. Better to have a more limited affair and serve everyone than to have a more lavish production and only invite a few. As for the grandparents, it sounds like they will be able to attend but there will be one room they will have trouble with. Well, it’s called getting old. Is there another venue that can be used? The rehearsal dinner is the groom’s affair, and you certainly have a right to substantial input since you are paying the bill. But don’t get hung up on the idea that it has to be held in some characterless banquet hall with rigid seating for everyone. The last rehearsal dinner I went to was a large barbecue and very informal. Usually they are coat-and-tie affairs, though.
Is there enough room at this proposed venue to set up a large marquee? If so, your problem is solved. Just plan for the dinner to be held in the marquee, with seating for everyone.
Two more things. I got married in my hometown because my wife had moved several times during her childhood and didn’t really have a hometown. My mother was ill, and so we essentially had to plan everything ourselves. For the rehearsal dinner we had capable caterers we trusted who consulted with us on the menu and told us what flowers to order. I think I purchased the wine. That’s it. Anyway, my point is that we did very little work and it turned out great. There were only about 70 guests as the venue was limited in size, but for us it was plenty. Perhaps you can consult with your son and daughter to be and reach an agreement on something that is acceptable. Then tell them that you will take care of everything else, and that the only thing they need to do is to provide you with a guest list and show up 45 minutes early for the dinner.
I will share something my wife and I did that I had never seen before but that others in my town have copied. We walked from person to person while everyone was still seated and introduced our friend or relative, sharing a cherished memory or funny story for each one. This took perhaps 15-20 seconds per guest and everyone enjoyed it. We enjoyed it. Just something to think about.
Finally, if you want more of your friends on the wedding guest list, talk to your son about it. If it will put a strain on the bride’s finances because she is paying for cost overruns, tell your son that you will pay for the honeymoon, or just give them a cash wedding present. It sounds like the bride’s mother has the attitude of the more the merrier, so you ought to find a way to invite your family’s friends to the wedding.