Wow, Larry was horribly self-centred. If you disagree with a host's rules, you absolutely do not go and challenge that on the day, making the entire event awkward for everyone. Especially if the host is an 89 year old woman who isn't as able to cope with these things and made the rules based on practicality.
She would have been within the realms of etiquette to turn him away, and that possibly might have been better for the guests. I can imagine it would have been very uncomfortable with him there, and he may have continued his entitlement throughout the meal with other things.
She invited him, and him only, to a family meal. He shows up with another person => he didn't accept the invitation that was offered. In effect, he made up his own version of the invitation, didn't inform her that he had done this, and expected her to be on board with it. Again, this is an 89 year old woman who is only just able to live on her own anymore and is trying to do something nice for her family before she no longer can. Since he didn't accept her invitation, it's perfectly polite to turn him away. I feel very sorry for his new girlfriend. I hope that this at least showed her what kind of person he was, and she moved on to someone who was above disrespecting the elderly.
It is perfectly acceptable for a host to limit attendees due to space, money, or practicality-based means. If you don't like that, then you don't go. Limiting it to blood family and married or long-term couples is an easy and largely accepted way to do this. Another often done thing is to say, "No-one under the age of 18." This is done at events with alcohol a lot, and is considered just as okay. What if an 18 year old has a new girlfriend who is a month shy of 18? Too bad. They deal with it, as any mature person should. It's not a personal jab, just a rule based on the practicality of what the host is able to offer. If a host can't create the extravaganza you want, then they are not obligated to book out a restaurant or hire a caterer. It's fine to scale back. If people still want a bigger party, they are always welcome to host one as well.