I don't think you can teach an adult manners. And your brothers delivery of the invitation was rude, for sure. He doesn't have to point out in an invite that he "last year killed him on cost".
That being said, I don't think it's out of the ordinary to throw a kids' party and only feed the kids. While I might personally choose a different time other than a common lunch or dinner hour (and for me 1 is kind of late for lunch), providing cake and refreshments to adults and meals for the kids is not that unreasonable.
I think people throw parties in different ways. I usually like to provide everything for a party vs having potlucks and I'd rather have a snacks for everyone than only full meals for kids. But, I don't think it's wrong to host potlucks or provide meals for children only at a children's party. If your brother did anything right, at least he let you know up front what to expect. Again, he could have left off the last sentence, IMO.
Also, I don't think your DH should have said anything to him. RE my first sentence: You can't teach an adult manners and I don't think it's polite (at least in this instance) to point out his 'rudeness', that he was improper, or that he isn't providing adequately at his party. I think you either accept the invite as is (even if you don't like it) and say nothing, or send your regrets.