OP, I'm not sure of your plans for having children or not, but if your child(ren) end up having food allergies and grandma keeps giving them the allergen, is "that's just how she is" going to be an acceptable response then? A toddler usually won't know a food has an allergen in it, or she could try to sneak it to them.
Personally, I'd never see her again. DH could visit with her, call her, and have the relationship with her. I would have a relationship with SIL and FIL. And, if I did have children, they would not have a relationship with MIL either. Otherwise, they will see MIL treating you like dirt and grow up thinking it's OK.
You're an adult now. You need to respect yourself. Respect for adults is earned, not given. MIL has not earned your respect. And she definitely doesn't respect you.
I, too, am curious how your DH can place his mother's happiness and not wanting to cause a scene above your health and happiness?
My 2 DC have various food allergies. My MIL doesn't believe they exist. She would bring/give treats when we would visit, and all of them would have the allergens in them. At first we would accept them kindly then throw them away after they left. After the 2nd time, DH reminded them about our children's food allergies. After the 3rd time, DH told his mom not to bring any more food into our house when they visited. After she started mailing it, he told her no more mailed gifts. (Side note: we always suggested alternate choices, or even adding the $ to a jar for a special outing during visits or even for college.) And after she had FIL call and yell at DH for "making his mom cry, all she wants to do is give these gifts", DH reiterated that having the food in the house could kill our children and having them alive is more important. Well, FIL refused to visit us for 2 years. SIL told DH he was being ridiculous and that he should just take the gifts and throw them away later as she did because giving things made MIL happy. But he never faltered. MIL is better with gifts (birthday and Christmas, and sends $ for Easter), but now is trying to control meals by saying everyone has to eat a little of everything on the table-house rules. Yes, foods with the allergens in them. So, now we do not eat at their house. Yes, it's caused stress. Yes, it's caused tension. However, my children's life and health (physical AND mental) is more important.