Hello there,
We had a large engagement party (100 people) in his hometown simply because we knew that his friends and family would not be able to come to the wedding. So far our confirmed guests are pretty much all my friends and family, but we knew that would be the case from jump.
I do not think it would be bad to have an engagement party and not invite all of the guests to your wedding. We let them all know up front that we were having a small wedding, and that is why we decided on the larger engagement soiree.
You do not really need to put all of the wedding information in the engagement party invitation. Only the basics about the engagement party need to go in there, ESPECIALLY if you are not inviting some of them to the wedding! Since the whole purpose for the party is your pending nuptials, you will get plenty of questions about the wedding and proposal, so use that time to answer questions about wedding details. That also serves dual purpose, because those people who you are inviting to the wedding can be told about it in more detail, while those "engagement party only" guests can be given the "small wedding in Cancun" spiel.
I don't think you will offend anyone at all! People will be more understanding than you think!
let me know if you have more questions