I don't think you did the wrong thing. If you feel the relationship isn't positive for your daughter, then by all means discourage too much association. As she is not short of friends now, you don't need to accept the invite just so she has friends.
Its possible this other child is now seeing that your daughter is branching out, and is feeling jealous and threatened. Maybe that is why she has asked her to come.
I do think we should try to get our kids to accept and be friendly and courteous to everyone. Perhaps you could get this girl to come to yours, and to can re-assess how the relationship is, and how your daughter is coping with this child's behaviour now that she has more friends and more confidence. And don't be scared to tell a child who has come to your home that they are out of line. If she is mean, ask her not to be, or she won't be able to come and play another time.
Protecting kids from all the unpleasant parts of socialising won't help them to learn how to stand up for themselves, so this experience may well turn out to have been good for your daughter. She knows Mum is on her side, and she has learnt that some friends aren't always kind, but others are, and that it isn't anything to do with her, but the other child's problem. Some very valuable life lessons for her!
