Definitely the latter, with one caveat, which I’ll get to in a second.
Your position is awkward because it’s humiliating; he’s in your Top 5, and you didn’t even make his Top Whatever. We’ve all been there and it’s no fun.
But there is (probably only) one good thing about being humiliated: If you decide it doesn’t matter, then it doesn’t matter, period.
Plus, wedding parties are snapshots. You missed the cut five years ago, but maybe now you’d make it. Who knows? Few stay close to every attendant.
So, just pick your preference, inviting your friend or saving face.
And heed that one caveat, which is: He lives far away + has a newish child + may not regard you two as close = he might not want to travel. And he might feel too guilty to say no. So, if you do opt to invite him, make it clear it’s OK for him to say no.
This is one of those times where you need to back your fiancee in a way that makes her life easier — enduringly so.
The mother’s complaints expose her as someone who feels powerless, superfluous, left out. If you take it upon yourself to give Mother the stiff-arm, then she’s likely to feel even more left out and increase the pressure versus dialing it back.
So try this instead:
(1) Remind Fiancee that you two are happy with these plans and that’s what counts.
(2) Float the idea that Mother is acting like this because she feels distant and excluded. Say it to explain, not excuse, since there are actual, grown-up ways to handle this that don’t involve criticizing and guilt-tripping.
(3) Ask Fiancee whether openness might calm her mother: “Mom, you’re far away and feel left out. I get that. How would you like to be involved? I want you to feel welcome.” Giving Mother a low-stress corner of the wedding to control, particularly one that suits her expertise, can be transformative. If not, oh well — then:
(4) Preach the gospel of owning one’s choices. You and Fiancee are having a simple D.C. wedding on your dime because that’s what makes sense for you — not because of or in defiance of or anything-else-of her mother.
So, she (and you) can walk that walk without apology, to Mother or anyone else: “Mom, this is what works for us; it’s not personal.” And, “Hm, I hadn’t thought of that. (Change subject.)” And, “Thanks for the suggestion. (Change subject.)”
The fault-finding is Mother’s choice, but the “depressed and angry” is Fiancee’s choice. This is as good a time as any for Fiancee, and you, to adopt a more empowered response.
Aunt With a Dilemma
Individual exclusions from big weddings are a dilemma; mass exclusions from tiny weddings are not. Go, enjoy, and promise to take good pictures.