I just read this elsewhere and liked it, so I'm taking the liberty of re-posting it here:
If I've heard it once, I've heard it a thousand times: The oft-repeated myth that if you cut your cake early, people will think the reception is over, and leave. Here, once and for all is my simplest response...
The only time people will leave your wedding is because there is no compelling reason for them to stay. Keep it moving, make it fun, and only a sad few will ever even look at their watch. I promise.
So, let's heap some loving kindness on the unfortunate few who simply cannot stay, either because of cranky children, cranky spouses or some other cruel twist of fate. If the cake is the magical signal that it's okay to leave, then by all means, give it to them in a timely and carefully-chosen way. It seems so much more compassionate than holding people dessert-hostage.
Cutting the cake early has scores of other benefits, not the least of which is the advantage of getting those traditional cake-cutting photos before the bride gets all sweaty on the dance floor (it's gonna happen). And when done right, the cake-cutting draws guests out of their seats without really asking, so you have the added benefit of friends and family right there with you, making you laugh, egging you on, and making the perfect backdrop for those photos, and then the first dance photos - and it just FEELS better having the people you love up on their feet and sharing the moment. Who in their right mind would leave THAT?
Remember those people that had to leave right after the cake? Well, when the First Dance followed right after the groom's heartfelt Thank You, they didn't want to miss it. And the Father-Daughter dance was sweet and brief, and flowed so perfectly into the Mother-Son song, well... they stayed for that too. Then the DJ played just the right song to open the dance floor, and a smiling Uncle grabbed them by the hand and pulled them out for a quick spin, and then... somebody paid the babysitter 3 hours overtime.