One of my favorite things for a kid's indoor birthday party is to make individual cupcakes, instead of a single cake, and then put out bowls of frosting, sprinkles, etc. and let each kid decorate his own cupcake. Then, when they're all done decorating (and each kid has somehow marked which cupcake is his) you stack the cupcakes up like a pyramid and make a "cupcake cake", which you then stick birthday candles in (and get pictures of). Then each kid retrieves his own cupcake and eats it!
It takes up time, and the kids have fun.
Simple is best. A simple craft project around the table, like cutting out head bands from construction paper and then gluing on different decorations, like buttons and other little things, can be really fun for kids that age.
Avoid anything that involves the kids getting up from the table and running around your house.