It is rude because it implies that the guests don't know how to dress appropriately if the invitation simply says "casual."
By the way, to my knowledge there are no hotels or restaurants in this city that have a "no jeans" rule. So that is definitely not a factor here. If it were, then at most I would include a small notation, "Please note that XYZ Hotel does not permit jeans." And yes, of course I understand why they did it. I just don't think that makes it okay.
I can understand why someone would prefer their guests not wear jeans. But if the jeans are very nice, clean and pressed, and part of an outfit nice enough to wear to an upscale restaurant, what's wrong with wearing that to a party so casual that neckties are forbidden? I can't imagine I would, but it wouldn't look funny or rude to me if someone else did. I happen to enjoy getting dressed up, but even I wonder what is the big deal about jeans per se.
I can also understand hosts not wanting their guests to wear flipflops, revealing clothing, shorts, and a lot of other things. But I think that going farther than to state the dressiness level -- casual, dressy, black tie, business, and even dressy casual (I'm not crazy about that either, but it probably would have been a good choice here) -- isn't good hosting. It's starting out by insulting their guests' judgment and manners, and seems like the hosts are less concerned with their guests' entertainment than with fulfilling their own vision of the evening. (Something like "fire and ice" is insane, unless it's some sort of costume party, I guess.)
I understand that hosts have worked hard and spent a lot and are entitled to that vision! In our circle, typically the invitations says one of the above, and the friends of the hostess (usually) know what her hope is and dress accordingly. My son and his bride put "black tie optional" on their wedding invitations. Our closest relatives and friends asked and learned that she put that because she was afraid that "black tie" seemed pushy or something, but that she was really hoping the women would wear long gowns or very dressy short outfits. So that's what they did. There were several guests who were dressed much more daytime-y. It really didn't spoil the evening at all, or even the overall look and feel that she had hoped for.
And at the other end, what about "no ties"? I assume that their intention was "ties not required," not that they were forbidding them (although that's what "no ties" means). But "casual" surely gets that across.
I did once go to a wedding for which the HC's invitation said "Absolutely no ties!!!!" Yes, including the exclamation points. I'm sure they thought it would be cute, but we found it sort of obnoxious, and I felt sorry for the groom's father, who ALWAYS wears a tie and feels uncomfortable without one, especially, I'm sure, at his own son's wedding. What was the point? Who would have been hurt if someone had worn a tie?
Look, it's not a big deal, and it certainly wouldn't affect our decision to attend, nor would we do something childish like wearing sweatpants. I'm just passing this on in case anyone else is considering doing something similar. Be advised that at least some of your guests will find it off-putting. You may not think they should, but if you care, now you know.