blah blah blah.
I'm not Catholic either, but here is a good and simple summary.
I found this request incredibly offensive, and no, I am not a hardcore Catholic. The 1st Communion is considered a sacrament (sacred); the first time a child is old enough to understand the meaning of Mass (celebrating the Last Supper and all that Jesus' sacrifice means to us) and partaking of it. Normally children are gifted with something of a religious nature like a cross or Bible, but please, send nothing. Your disdain for the worlds largest Christian religion is obvious and you would not want to be hypocritical, I'm sure.
I am Catholic and I do think some people get really carried away with this and take the focus off of the sacrament itself. Ceremony is an important part of the Catholic church and sometimes it does put folks off, but there is a meaning and reason for the ceremony.
It is a personal choice as to how dressed up your child gets. You should feel under no obligation at all to send a gift. I also personally think it's quite odd to send invitations for these things. In our family, we invite immediate family members and don't even invite non-Catholic friends as you suggest the sacrament means nothing to many of them. However, it might be nice to just send your niece a nice card and note.
i agree with Katy G.