seems she is quite harsh looking at the subject title....so who looks after yr dear daughter? Yrself?
if things gets out of hands, really gotta move out then be it....otherwise you will be living in misery everyday....worst if it affects yr relationship with hubby.
how about yr father in law? Any chance to talk to him to persuade your mother in law about moving out?
Or if she is so strongly against the idea, why not move to one block away or several floors apart within same block if you can find a resale flat near her house? you can also get housing grant for staying near parents and yr dear husband can care for her when she is old....possible to tell her you need extra space next time when yr dear daughter grows older or you r planning to have more kids? Instead of giving her the idea of avoiding quarrels or make her think negative?
The elders are more stubborn and hard-headed....its in their upbringing and the way they lived life last time before we were born....cannot be changed...only can get around it without being too obvious.......but not easy....