Oh, this is a horrible position to be in!! Sounds awful! And unless your dh has kinda a crappy relationship with her, you can't win!
I tend to take the coward way out, and make dh deal with my MIL. He knows what to say to get her to back off and I... even after 9 years.. don't. My MIL is like yours- tries to back us into a corner all the time. She's an ok person, but won't accept a "I'm sorry, but no" for an answer. And around here, when you finally get through to her, she stops talking to ya for months on end.
IMHO, you have every right to say no. But I also think you need to talk to your dh. It's HIS mother. Maybe he can talk to her? My dh has gotten good about this, but there was a time that his mother started WWIII with me, and my dh didn't want anything to do with it... even though it was HIS MOTHER. But that's a post for a different thread
Regardless, your herd is at risk here if you give in. So don't. What's the worse that will happen, honestly? If it puts your marriage at risk, then you need to decide if it's worth it. But if your dh is a good man like mine, risk making the woman furious and stand your ground. Believe me- I understand how this is. Give my MIL an inch and she'll walk all over us. (Including saying she was going to buy a trailer (a house trailer, NOT A camper) and parking it in our driveway to LIVE IN).
Meghan