Options instead of the cupcake...my son has a great teacher this year who challenged the class parents to think outside of the box when it comes to birthday celebrations in the classroom. She found a "Birthday Menu" that she hung in the classroom.

The main point his teacher was trying to convey was that the child had a choice how and what they would like to do to celebrate their birthday in school.  Some examples could include:
-having a PJ day
-bring in your favorite stuffed animal
-have a parent bring in a craft to do with the class
-have the birthday child read announcements over the loud speaker
-bring in a special game to play or movie to watch
-have lunch with the teacher
-have an extra recess

At the end of the day, if the child/family really wants to bring in a special treat, then great.  Just make sure that you give the teacher advanced notice so he/she can notify food allergy parents.