I think that I would immediately go over and meet these parents, and listen carefully to what they say, what they do not say, and also listen to that little voice that is whispering in your mind. Check out their house, any beer cans lying around, far too many liquor bottles on display? Car with a lot of dents? Kids sullen around the parents? And ask friends about these people, they should be known around town if they have teenagers.
Remember, this is only a party, kids take parties to heart, and they don't have the life experience to see muddy roads ahead. It won't damage her permanently if she is not allowed to go to this overnight. There might be a lot of screaming and crying, or merely sullen moments, but you have to do what you believe to be the right thing. I remember some of the yelling and arguing from my oldest daughter because of not being allowed to run around all night like her friends, she wanted to do what SHE wanted.....now she is a guard in a Texas Jail!!!
I don't think you are over-reacting at all. My second husband, who raised my two daughters, and I were parents, not best friends with them till they were grown. Teens think they are grown men and women, but do lack the wisdom to look below the surface of some people.