There are no rules on how to throw a Woodstock party, but you can celebrate the festival of peace and love cheaply and easily. If you have a lot of outdoor room and understanding neighbors, it could be held outside. If there is a lot of mud outside, that could work out fine since the original Woodstock in 1969 did have some rain issues.
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If you want to send out invitations, make them look like the original Woodstock ticket (see references). The guests should wear fashions from the late 1960s, which would mean cutoffs, tie-dyed shirts and jeans.
Serve hot dogs and a rice-carrot-raisin dish. More than 500,000 hamburgers and frankfurters were consumed on the first day of Woodstock even at the then whopping price of $1 each. Members of the Hog Farm Commune served 51 cauldrons of the rice-carrot-raisin dish. Make the rice as you normally would, then add a handful of raisins, a half-handful of chopped carrots, and 1/4 cup of honey. Simmer it together until it's gooey.
Play Woodstock music or the movie, "Woodstock." There are many music options, including "Woodstock: 40 Years On, Back to Yasgur's Farm," a 6-CD set from Rhino, and "The Woodstock Experience" from RCA. The 1970 movie "Woodstock" was reissued on DVD as a director's cut with extra performances. Since it's a lot of concert footage, guests can stop and catch whatever act they want to see without having to sit through the whole thing.
Set up trivia or party games around the names of performers. One simple game could just ask the contestants which acts were there. The acts that did perform at Woodstock were Richie Havens, Sweetwater, The Incredible String Band, Bert Sommer, Tim Hardin, Ravi Shankar, Melanie, Arlo Guthrie, Joan Baez, Quill, the Keef Hartley Band, Country Joe McDonald, John Sebastian, Santana, Canned Heat, Mountain, Grateful Dead, Creedence Clearwater Revival, Janis Joplin with The Kozmic Blues Band, Sly & the Family Stone, The Who, Jefferson Airplane, Joe Cocker, Blood, Sweat & Tears, Johnny Winter, Crosby, Stills, Nash & Young, Paul Butterfield Blues Band, Sha-Na-Na and Jimi Hendrix.