Talk to the people at Chester Creek Cafe. They might be able to accommodate you. Carla is the owner, Trees is the manager there.

Sammy's Pizza in West Duluth has a large back room that can accommodate that kind of crowd.  The only drawback is that they won't always let you reserve it ahead of time.  We've had several birthdays and other gatherings, and once they told me that it couldn't be reserved.  Other times they've held it for us.  It's certainly worth a call, especially if you like their pizza.

You are in my zone, here.  But I don't really know many places that would do this without a rental charge.  Ridge view lanes was doing some stuff like this, plus people could bowl, too.  

You might talk to (one of my favorites) Uncle louis about staying open and using their back room, if that's big enough.  Sunshine cafe and some other similar folks cafe type places might do the same. 

I would agree with Valentini's, good choice there. 

Another idea would be to get one of the community centers (or even better, a park) and do it with simple catering and/or a pot luck and/or a family picnic model.  A local farm, state park facility or church basement might work for that option, too.  Might be done for under $500 ... might not be ...

Remember Shakey's Pizza? That would have been a fun place.