New to being a grandparent . Wondering if i am over reacting.

I wouldn't be! 7 year old's birthday parties are usually hellish once you've been there and done those a few times and then left it all behind. Occasionally my husband had one to one's with his grandchildren which are my step grandchildren, neither of us would have been upset to be left out of any child's birthday, when I was arranging such events I found them a real penance labour of love. I certainly didn't enjoy hanging around at other young children's parties even if they happened to be my own grandchildren's. Although sometimes we'd do a separate event for them at ours with a cake, candles and presents, maybe do that for your granddaughter when you may have more interaction anyway, adults are superfluous to children when they have all their friends round them. I think they, your daughter in law and son have every confidence in you in that they are leaving your new grandson with you, that could be a lovely bonding opportunity.

Congratulations of the birth of your new baby grandchild hope you enjoy your time with him, I really wouldn't be upset, clearly they've thought it through and presumably think it will be better for him to be with has grandma than at a noisy party for 7 year olds I'd look at that from a positive point of view rather than thinking you are being excluded.

Well you can be upset, or maybe miffed, or you can see it as a perfect opportunity to have abit of one to one time with the little one.
Perhaps they want to spoil the seven year old a little by leaving baby with you and giving their full attention to her?
If it were me, I would feel abit miffed that everyone including you and baby couldn’t go, but I would keep my feelings to myself!